NEW YORK/LONDON- The dollar gained slightly and remained on track for its largest weekly gain in over a month as investors eyed rising bond yields and continued to make bets on the US Federal Reserve’s interest rate hiking path.
The US currency gained steam as the session wore on and was up against the euro and the yen but was down slightly against sterling, which regained some lost ground after a volatile session on Thursday following Britain’s latest budget.
In the United States on Thursday, investors had reacted to hawkish policy maker comments with St. Louis Fed President James Bullard saying that even under a “generous” analysis of monetary policy, the Fed needs to keep raising rates as its tightening so far “had only limited effects on observed inflation.”
The euro was down 0.34 percent against the dollar at $1.0329 after earlier rising as much as 0.29 percent. The pound GBP=D3 pared gains against the greenback and was last up 0.22 percent after rising as much as 0.70 percent earlier.
Both the euro and sterling had hit multi-month highs against the dollar earlier this week after inflation data showed an easing in US price pressures.
Joseph Trevisani, senior analyst at FXStreet, pointed to hawkish remarks from Fed officials such as Bullard which “helped to thwart speculation that the Fed was nearing a pause” in its campaign against inflation, and set the stage for gains in the dollar along with US Treasury yields.
“A two-day recovery in US Treasury rates has given the dollar a modest improvement after last week’s sharp inflation driven sell-off,” said Trevisani.
Some analysts also suggested that investors may be positioning for the year-end after the dollar’s strong run for the year to date.
