Dollar climbs as upbeat U.S. data stokes rate hike bets

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LONDON/HONG KONG (Businesshala) – The dollar jumped on Wednesday, as strong U.S. retail sales data raised bets on earlier Federal Reserve rate hikes, while concerns about COVID-19 in Asian markets diluted shares in Europe. made profit.

File photo: Euro, Hong Kong dollar, US dollar, Japanese yen, pound and Chinese 100 yuan banknotes are seen in this illustration on January 21, 2016. Businesshala/Jason Lee/Illustration/File photo

The dollar climbed to a 4-1/2-year high against the Japanese yen on Tuesday, following US data on a stronger-than-expected retail sale last month.

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With inflation running high, the data boosted expectations of a rate hike by mid-2022. Investors also said the data could encourage the Fed to accelerate its asset purchase program.

“We’re finally at a place where it looks like growth is still pretty strong,” said Mike Bell, global market strategist at JPMorgan Asset Management. “The Fed is going to lower before the Fed raises rates, and I think that’s backing the dollar.”

The greenback rose to 114.98 yen before turning flat at $114.82, with the euro falling for the first time since July 2020.

The dollar index – which measures the currency against six rivals – climbed to 96.26, its highest level since last July. Its strength weighed on the US Treasury, with the benchmark 10-year note yield reaching a three-week high of 1.649% in Asian trading hours.

However, the equity markets saw a slight uptick.

The broader euro STOXX 600 posted a sixth day of gains, up 0.1%, with both German and French stocks up about 0.2%.

Yet British shares fell 0.2% against the euro, pushing the pound below its strongest level in 21 months when inflation hit a 10-year high, prompting Bank of England bets for a rate hike. Placement.

Against the US dollar, sterling rose 0.3% to $1.3480, its highest level since November 10. Analysts said the BoE may hike rates after surprising investors by keeping policy stable last month.

Analysts at MUFG wrote, “There is no chance of any reversal of expectations once the inflation data is released.” “Some well-telegraphed factors helped push inflation higher … we don’t think the data turns the dial much in terms of BOE response.”

Biden-XI

The MSCI World Equity Index, which tracks stocks in 50 countries, fell 0.1%. The Wall Street futures gauge pointed to similar gains.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3% from Tuesday’s three-week high, and was set for its biggest fall of the month, with a seven-day high. There was profit.

Panic over COVID-19 came as South Korea’s KOSPI slipped 1.2% after the country reported the second-highest daily new coronavirus infections since the pandemic began.

Still, US President Joe Biden and Chinese leader Xi Jinping shrugged off some heat in Sino-US tensions in talks on Tuesday, though both sides strengthened their positions on a range of issues.

A positive tone offered modest but brief gains in Asian stocks on Tuesday.

“The Biden-Xi summit “had the potential to do harm, but it doesn’t seem to be the case,” said Rob Carnell, head of research for Asia Pacific at ING.

US gasoline inventories fell more than expected last week after plunging oil prices increased pressure on US officials to release oil from emergency reserves.

US crude fell 0.6% to $80.27 a barrel. Brent crude fell 0.5% to $81.96 a barrel.

Reporting by Tom Wilson in London and Alun John in Hong Kong; Editing by Sam Holmes and Simon Cameron-Moore

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