© Reuters. FILE PHOTO: British pound notes and change are seen inside a cash register at a coffee shop in Manchester, Britain, September 21, 2018. REUTERS/Phil Noble
by Rae Wee
SINGAPORE (Reuters) – The US dollar resumed its rally on Tuesday after a brief pause earlier in the week, getting back on track to end the month with an impressive gain after a four-month losing streak.
Market expectations that the US Federal Reserve would have to raise rates more than initially expected, gaining momentum after a series of upbeat US economic data, have sent the dollar tearing in The last weeks.
The , which measures the currency against a basket of pairs, rose 0.18% to 104.84 in Asia trade and expected a monthly gain of more than 2.5%, its first since September.
Resilience in the world’s largest economy has given reason for Fed policymakers to remain hawkish, with investors now expecting the Fed funds rate to peak at just above 5.4% in September.
“The dollar has rallied, fully justified by the strength of the January numbers released in February and the Fed’s repricing,” said Ray Attrill, head of FX strategy at National Australia Bank (OTC:), referring to the strong run of US economic data
“I think we are bouncing from one major data impression to another… The next move in the dollar is really a function of how the February data starts to play out in March.”
Elsewhere, the British pound gave back some gains from the previous session, falling 0.18% to $1.2041.
It had risen 1% on Monday after Britain and the European Union announced a new deal for Northern Ireland’s post-Brexit trade deals, known as the Windsor Framework.
That brightened the post-Brexit outlook for the UK economy, with British Prime Minister Rishi Sunak saying it would pave the way for a new chapter in London’s relationship with the bloc.
The euro was down 0.22% at $1.0585, having similarly risen 0.6% in the previous session on the news.
Britain’s parliament is expected to vote on the deal, and the opposition Labor Party says it will vote in favour.
The leader of Northern Ireland’s Democratic Unionist Party (DUP) said his party was working out the details.
“The ambient music suggests this will succeed…there’s probably room for some sort of residual sterling strength here,” Attrill said.
“The real thing is, is this a springboard for a stronger and much better removal of trade frictions in general, between the UK and the EU?”
Against the Japanese yen, the dollar rose 0.07% to 136.31. Incoming Bank of Japan (BOJ) Governor Kazuo Ueda has so far offered little clue as to whether the bank might exit its massive stimulus imminently, though he indicated he had ideas about such a move.
Incoming Lieutenant Governor Shinichi Uchida also on Tuesday ruled out the possibility of an immediate review of the BOJ’s ultra-loose monetary policy.
It fell 0.3% to $0.61475, while it fell 0.28% to $0.6720.
Data released on Tuesday showed Australia’s current account surplus widened sharply in the December quarter, while separate data pointed to a strong rebound in Australian retail sales in January after a surprise drop in December.