TOKYO- The dollar hovered near a one-month peak versus major peers on Thursday after robust US retail sales added to building expectations the Federal Reserve will not rush to lower interest rates.
The US dollar index which measures the currency against a basket of six rivals, eased slightly to 103.29 in the Asian afternoon, after reaching 103.69 on Wednesday for the first time since Dec. 13.
Traders have trimmed the odds of a first Fed rate cut by March to 61 percent , from 65.1 percent on Tuesday, according to CME’s FedWatch Tool.
The market is still pricing in a likely 150 basis points of cuts by the end of the year, even as Fed officials including Governor Christopher Waller this week pushed back against expectations of rapid policy loosening.
“Pricing in the US rates market now looks much more reasonable,” said Tony Sycamore, an analyst at IG. “The rebound in the USD in 2024 has come far enough for now.”
The dollar pushed as high as 148.525 yen overnight for the first time since the end of November.
It was last trading 0.08 percent lower on the day at 148.04 yen. At the end of last week, though, it was as weak as 144.35 yen.
Investors have been steadily pricing out hawkish Bank of Japan wagers, not least due to the devastating New Year’s Day quake in central Japan. The BOJ meets on policy on Monday and Tuesday of next week.
“I think dollar-yen is going to be floating between 145 and even 150 in the near term,” a level last seen in mid-November, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.
Should the BOJ stick to its dovish message next week, and if Fed Chair Jerome Powell strikes a similar posture to Waller at the US central bank’s policy meeting on Jan. 30-31, the dollar could push beyond 150 yen by the start of February, Omori said.
