US dollar rises as markets evaluate economic data

The dollar rose on Friday and is heading for weekly gains for the fifth time in a row as traders evaluate the latest economic data and amid strong expectations that the Federal Reserve (the US central bank) will cut interest rates in June, while the yen stabilized around the morally important level of 150 yen to the dollar.

According to Reuters, the dollar index, which measures the performance of the US currency against six major competing currencies, rose 0.13% to 104.40 today, Friday, after falling 0.4% yesterday, Thursday. The index is heading for weekly gains of 0.3%.

The dollar fell on Thursday after mixed US data, with retail sales falling more than expected in January, while a separate report highlighted the strength of the labor market.

A series of strong US data dispelled any lingering expectations of early and deep cuts in interest rates from the US central bank, and according to CME’s Fed Watch tool, traders now expect 80% to cut interest rates in June after markets had expected a trend towards… The US Central Bank to reduce interest rates starting in March.

Traders now expect cuts of 94 basis points this year, which is closer to the Federal Reserve’s expectation of a 75 basis point cut, and significantly lower than the 160 basis point cuts that were expected at the end of 2023.

The Japanese yen fell 0.22% to 150.26 per dollar, and is hovering around the 150 level, which is the level that puts the market on alert for possible intervention by Japan.

The yen, which is highly affected by US interest rates, has lost six percent against the dollar this year as traders retreated from their expectations for a cut in US interest rates.

Meanwhile, the euro fell 0.11% to $1.0761, heading for a slight decline during the week and near a 3-month low of $1.0695 that it touched earlier this week.

The British pound fell to $1.2582, down 0.15% during the day, and is on its way to a loss of 0.4% for the week.

The Australian dollar fell 0.08% to $0.65195, while the New Zealand dollar lost 0.16%, falling to $0.60965.