NEW YORK: The dollar reached its highest since early November against a basket of currencies on Monday, and sent the yen to its lowest level since 1990, after US retail sales increased more than expected in March.
Retail sales rose 0.7% last month and data for February was revised higher to show sales rebounding 0.9% instead 0.6% as previously reported. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rising 0.3% in March.
The greenback has gained as still sticky inflation and still strong growth leads investors to push back expectations on when the Federal Reserve is likely to begin cutting rates. The US central bank also now expected to make fewer cuts than previously.
“US data just keeps coming better and better than expected,” said Brad Bechtel, global head of FX at Jefferies in New York.
Traders are now pricing in fewer than two 25 basis points cuts by year-end, after previously expecting three.
New York Fed President John Williams said on Monday that Fed policy was in a good place and remained restrictive, adding that his own view was that interest rate cuts would likely begin this year.
The Japanese yen in particular has suffered from US dollar strength and the large interest rate differential between the two countries.
Japanese monetary officials have ramped up warnings that they may intervene to shore up the currency. Finance Minister Shunichi Suzuki said on Monday he was watching currency moves closely, repeating that Tokyo is “fully prepared” to act.
The dollar was last up 0.69% against the Japanese currency at 154.32.
The dollar index reached 106.16, the highest since Nov. 3, and was last up 0.07% at 106.03.
Investors are also focused on escalating tensions in the middle east, which if they worsen are likely to benefit the safe haven US dollar and Swiss franc.
President Joe Biden warned Prime Minister Benjamin Netanyahu the US would not take part in a counteroffensive against Iran, an option Netanyahu’s war cabinet favors after a mass drone and missile attack on Israeli territory, according to officials.
The euro was little changed against the dollar at $1.0643.
It recorded its biggest weekly percentage drop since late September 2022 last week as the European Central Bank left the door open to a rate cut in June.
The pound strengthened 0.22% to $1.248.
In cryptocurrencies, Bitcoin fell 1.64% to $66,035. It reached $61,323 on Saturday, the lowest since March 20.
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