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Dollar gains as positive US data boosts rate hike view

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The dollar gained across the board on Friday after generally upbeat U.S. economic data revived some expectations that the Federal Reserve could consider raising interest rates again this year.

The dollar index, a measure of the greenback's value against six major currencies, was on track for its best weekly performance since November. Against the yen, the dollar rose to a more than one-week high.

Friday's data showed that U.S. economic growth slowed in the fourth quarter, but not as sharply as anticipated, while consumer spending rose last month. Those reports if followed by another robust U.S. nonfarm payrolls report next week should put rate hikes back on the Fed's agenda.

"The fact that GDP was revised higher is a positive for the dollar this morning ... giving confidence to markets that the Fed may resume its tightening policy this year," said Sireen Harajli, currency strategist at Mizuho Bank in New York.

The dollar index hit a three-week high of 98.260, before trading 0.87 percent higher at 98.14. The euro, meanwhile, was down 0.98 percent at $1.0932 after falling to a three-week low of $1.0912.

Further boosting the dollar was a report showing U.S. consumer spending rose 0.5 percent last month, higher than the forecast of a 0.3 percent gain. More importantly, the core PCE index, an inflation indicator keenly watched by the Fed, inched higher to 0.3 percent.

"We're finally starting to see the effects of lower energy costs and stronger wage growth coming through in actual consumer spending," said Brian Dolan, head market strategist at DriveWealth in Chatham, New Jersey.

"Taken together, it's a good start for the year and should go a long way to dispelling fears of a consumer-led slowdown."

The dollar also gained against the yen, climbing 0.69 percent to 113.88 yen, breaking the Japanese currency's streak of gains. The yen, however, was still on track for its best month in more than seven years.

Sterling was down 0.78 percent against the dollar at $1.3865, on track for its heaviest weekly losses in almost six years, with traders concerned Britons will vote to leave the European Union in a June 23 referendum.

Meanwhile, a Group of 20 meeting began in Shanghai on Friday with recent market turbulence front and center.

But investors did not expect the meeting to produce any agreement to stop currency devaluations since G-20 meetings have historically disappointed.