NEW YORK, May 17 — The dollar rose to a seven-week high today, boosted by safe-haven bets amid the risk of a US debt default, with traders paring back bets on a Federal Reserve interest rate cut any time soon following solid US consumer spending and housing data.
The US dollar index, a measure of the greenback’s value against six major currencies, climbed as high as 103.12, its strongest level since late March.
It was last up 0.3 per cent at 102.91. The euro, meanwhile, dropped to a six-week low versus the dollar at US$1.0811 (RM4.86).
It last changed hands at US$1.0830, down 0.3 per cent. “Recent data is painting a more resilient picture of US growth compared to Europe,” said Joe Manimbo, senior market analyst at Convera in Washington.
“Moreover, elevated inflation and low unemployment on this side of the pond suggest any US rate cuts are likely to materialize later rather than sooner.”
Today’s data showed that US single-family homebuilding increased in April, but data for the prior month was revised sharply lower.
Single-family housing starts, which account for the bulk of homebuilding, rose 1.6 per cent to a seasonally-adjusted annual rate of 846,000 units last month.
Data for March was revised down to show single-family homebuilding falling to a rate of 833,000 units instead of increasing to a pace of 861,000 units as previously reported.
That followed reports yesterday that US retail sales rose in April, although lower than expected. But the underlying trend remained strong.
US industrial production also gained, advancing 1 per cent last month, easily topping expectations for a flat reading and up slightly from the revised 0.8 per cent increase in March.
In late morning trading, the dollar rose 0.7 per cent versus the yen to 137.37 yen, after earlier climbing to a two-week peak of 137.445.
The dollar also traded higher against sterling, which fell 0.2 per cent to US$1.2465. The pound fell as low as US$1.2422, the weakest level since late April.
US debt ceiling talks remained in focus. President Joe Biden will continue talks with congressional leaders on the United States’ debt limit later this week, the White House said today, as US House of Representatives Speaker Kevin McCarthy vowed to avoid a default.
“I think at the end of the day, we do not have a debt default,” McCarthy said in an interview with CNBC. Interest rate futures pricing implies no chance of a Fed rate cut in June, down from about a 17 per cent chance seen a month ago.
“We expect some modest further increases in the dollar as markets continue to take out pricing for rate cuts,” said Commonwealth Bank of Australia strategist Joe Capurso.
“A rate hike is possible this year, though the hurdle is high.”
Elsewhere, the Chinese yuan weakened past 7 per dollar today for the first time in five months amid geopolitical tensions and more signs of China’s post-Covid-19 recovery losing steam. In the offshore market, the dollar rose 0.2 per cent to 7.00911. — Reuters
