Dollar rallies in New York

The US dollar hit a near-three-week peak on Thursday, driven higher by sentiment that US interest rates inevitably will rise, with the prospect of a June increase still in the mix despite spotty economic data. Interest rate differentials between benchmark US and German 10-year government bonds widened to 1.771 percent on Thursday, their biggest spread since March 26.
The euro fell to its lowest level since March 19, trading off 1.34 percent to $1.06370 on the EBS trading platform.
The greenback climbed 1.28 percent to 0.9790 Swiss francs, a near three-week high. The dollar gained 0.42 percent to 120.74 yen, its best level since March 20.
Sterling fell 1.24 percent to $1.4680, a three-week low. Prospects for the dollar looked shaky after weak jobs data last week, but two US Federal Reserve officials said on Wednesday that interest rates could still rise in June. Minutes from the Fed's latest policy meeting, also released on Wednesday, showed some officials are eager to start raising rates.
"What the minutes did was jolt market expectations back toward September and even put June in play if data really picks up in the second quarter," said Mark McCormick, a foreign exchange strategist at Credit Agricole in New York.
"It'll put the focus on US data next week, in particular, the US retail sales number, to see if weakness seen in the Q1 data reports were largely transitory. We're looking for a turnaround in the dollar to move higher next week," he said.
Earlier data showed weekly US jobless claims rose less than expected last week and the four-week moving average of claims hit its lowest level since 2000. This suggests the slowdown in US economic activity in the first quarter might be a temporary blip.
"Broadly, the drivers for euro/dollar lower remain two things," said Richard Cochinos, head of Americas G10 FX strategy at Citi in New York. "One, the impact of QE (quantitative easing) on the rate differentials and respective rates markets, so you do have capital outflows through the fixed income channel. But then you do also have tail-risk on Greece and it remains quite serious the closer you get to the end of April."
Greece made a 450 million euros payment to the International Monetary Fund. Athens, shut out of international capital markets, forecasts running out of cash in weeks unless it can agree with the European Union on economic reforms.