Thursday 28 Mar 2024
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LONDON (March 29): The US dollar pulled away from 4½-month lows against a currency basket on Wednesday after solid data backed expectations for more US interest rate hikes this year, while sterling was knocked by Britain triggering its exit from the European Union.

The dollar index, which tracks the greenback against six major rival currencies, rose to 99.911, up 0.2%. It managed to crawl off a low of 98.858 hit earlier this week, its weakest level since Nov. 11, in the wake of US President Donald Trump's failed healthcare reform bill.

Helping the greenback was data that showed US consumer confidence index hit 125.6 in March, surpassing expectations for a reading of 114, and much higher than 116.1 in February. The March level marked the highest since December 2000.

The numbers also pushed up US Treasury yields, further bolstering the dollar's appeal. The yield on benchmark 10-year notes rose to 2.412% in Asian trading, from its US close of 2.409% on Tuesday.

US Federal Reserve Vice Chairman Stanley Fischer said in a television interview on Tuesday that two more increases to US overnight interest rates this year seemed "about right".

"(The dollar's strength) is probably more a function of the very strong US consumer confidence numbers we saw yesterday and the somewhat more hawkish noises we've seen emanating from the Fed," said Alvin Tan, currency strategist at Societe Generale in London.

The Fed raised rates in March, and a majority of the central bank's policymakers foresee at least two more increases this year.

But Fed Governor Jerome Powell said on Tuesday that the collapse of the healthcare reform bill had made the US central bank's job harder as it tried to anticipate which set of policies would pass.

Trump's healthcare reform failure last week raised doubts about his ability to carry out his fiscal stimulus and tax cuts, and pressured the US dollar to 110.11 yen on Monday, its lowest since Nov. 18. It has since recovered almost 1% and last stood at 111.15 yen, flat on the day.

"I think the optimism about 'Trumponomics', against the failure to pass the Obamacare reform bill, is still dominating the dollar/yen market," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

Sterling wallowed at one-week lows, 0.4% down on the day at US$1.2395 as investors braced for British Prime Minister Theresa May's move later on Wednesday to formally file paperwork to leave the European Union.

The euro was lower 0.3% on the day at US$1.07835.

 

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