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Dollar Bulls Rejoice: U.S. Dollar On The Rise This Week

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The U.S. dollar is on the rise this week, boosted by rising US Treasury bond yields and speculation that the Federal Reserve will continue to hike interest rates. The USD/JPY rate had risen to its greatest value in almost five weeks as of the latest update, hovering slightly higher than 133.00.[0] Kishida, Japan’s Prime Minister, expressed his expectations that the new Bank of Japan Governor will maintain a prudent monetary policy while taking into account the economic, inflationary, and market conditions.[0]

The hawkish comments from Philadelphia Fed President Harker gave the dollar a boost when he said the Fed must raise the fed funds rate above 5% and keep it there.[1] On Friday, the dollar index (DXY00) experienced an increase of 0[2] On Friday, the dollar saw a moderate increase in value after the yield on 10-year Treasury notes rose to a 5-week high, thus increasing the difference in interest rates and strengthening the dollar.[1]

On Friday, the Dollar Index rose to a weekly peak of 103.01, driven by the apprehension that the robustness of the American economy might lead to sustained high interest rates. Nevertheless, at the end of the week, the Index closed slightly lower at 102.92.[3] Over the course of 7 days, the DXY increased by 0.97%.[3]

It is believed that the US data for the month of January may be strong due to weather-related factors, which could maintain short-term US rates and the dollar in a positive position in the immediate future.[4] We will be paying special attention to retail sales figures, industrial production numbers and the Empire Manufacturing index, which are all anticipated to improve.[4]

The Fed evidently needs to continue to increase rates, and hikes seem probable in March and May, as January’s month-on-month figure was 0.5%. Economists at BNY Mellon retain a view that the Fed will raise rates one more time to 5% (possibly twice more to 5.25%) and hold there for most of the year.

Three straight days of gains are giving hope to embattled dollar bulls who are looking to a slew of Federal Reserve speakers and rising US-China tensions to extend a nascent rebound.[5] On Friday, the U.K. will be releasing its gross domestic product data, which is believed to display the economy teetering on the brink of recession.[6] The GBP/USD rate dropped by 0.1% to 1.2105 following the publication of the[7]

0. “Forex Today: US Dollar keeps its footing ahead of mid-tier data releases” FXStreet, 15 Feb. 2023, https://www.fxstreet.com/news/forex-today-us-dollar-keeps-its-footing-ahead-of-mid-tier-data-releases-202302150709

1. “Dollar Climbs With T-Note Yields” Barchart, 10 Feb. 2023, https://www.barchart.com/story/news/14105745/dollar-climbs-with-t-note-yields

2. “Dollar Slightly Higher On Hawkish Fed Comments” Barchart, 8 Feb. 2023, https://www.barchart.com/story/news/14029082/dollar-slightly-higher-on-hawkish-fed-comments

3. “Blockbuster Jobs Report Reverses The U.S. Dollar’s Slide” RTTNews, 6 Feb. 2023, https://www.rttnews.com/3342051/blockbuster-jobs-report-reverses-the-u-s-dollar-s-slide.aspx

4. “FX Daily: Data Can Still Lift The Dollar” MENAFN.COM, 15 Feb. 2023, https://menafn.com/1105576840/FX-Daily-Data-Can-Still-Lift-The-Dollar

5. “Dollar Rebound Set to Extend Amid Fed Speakers, China Tensions” Advisor Perspectives, 6 Feb. 2023, https://www.advisorperspectives.com/articles/2023/02/06/dollar-rebound-set-to-extend-amid-fed-speakers-china-tensions

6. “Dollar near one-month high; strong payrolls, rising Chinese tensions help” Yahoo! Voices, 5 Feb. 2023, https://www.yahoo.com/now/dollar-near-one-month-high-032519784.html

7. “Dollar edges higher; sterling lower despite U.K. avoiding recession By Investing.com” Investing.com, 10 Feb. 2023, https://www.investing.com/news/forex-news/dollar-edges-higher-sterling-lower-despite-uk-avoiding-recession-3000149

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