Gertrude Chavez-Dreyfus
NEW YORK (Reuters) – The U.S. dollar rose on Thursday, helped by data showing higher-than-expected producer prices last month and fewer people filing for unemployment benefits, suggesting the Federal Reserve may cut number of rate cuts this year.
The index, which compares the currency to six major peers, has risen in three of the last four sessions. It was last up 0.6% at 103.36. The index rose 0.6% for the week, its biggest weekly gain since mid-January.
Data on Thursday showed the U.S. final demand producer price index rose 0.6% in February after rising an unrevised 0.3% in January. Economists predicted an increase in the producer price index of 0.3%.
In the 12 months to February, the producer price index rose 1.6%, following a 1.0% rise in January. The report followed Tuesday’s data that consumer prices rose strongly for the second month in a row in February.
A separate report from the Labor Department also came in better than expected, showing that initial claims for state unemployment benefits in the U.S. fell by 1,000 to a seasonally adjusted 209,000 in the week ended March 9. Economists had forecast 218,000 claims in the final week.
“The price action proves that people were not prepared for how strong all the (U.S. data) were this morning,” said Eric Bregar, director of currency and precious metals risk management at Silver Gold Bull in Toronto.
“The way we’re thinking now is: What can the Fed say dovishly next week? If anything, they may take the hawkish side.”
The Fed’s current dot plot, or central bank interest rate forecast, showed three rate cuts in 2024, although that was released back in December. Since then, U.S. inflation figures have been stable while the labor market has remained tight.
The US central bank’s policy meeting will take place on March 19-20, and while the market is not expecting any changes in interest rates, investors will be closely watching for changes in the dot plot.
U.S. interest rate futures cut odds of a rate cut at the June meeting to 60% from about 67% late Wednesday, according to data from the LSEG application. The market is now forecasting fewer than three rate cuts in 2024, down from three to four about two weeks ago.
Another piece of data Thursday showed a slight slowdown in spending. U.S. retail sales rose 0.6% last month, but January figures were revised down to show sales falling 1.1%, instead of 0.8% as previously reported.
Economists polled by Reuters had forecast retail sales, mostly goods and not adjusted for inflation, rising 0.8% in February.
The retail sales report, however, did not shake the market’s growing confidence that the Fed’s rate-cut cycle will be gradual.
Elsewhere, the Bank of Japan began taking steps to end its negative interest rate policy at its March 18-19 meeting, Jiji news agency reported. The yen strengthened against the dollar and euro after the report, but has since weakened against the US dollar.
Preliminary results from Japan’s spring wage talks are due on Friday, with several of the country’s biggest companies already agreeing to meet union demands for higher wages.
The dollar was last up 0.4% against the yen at 148.29 yen, while the euro remained lower against the Japanese unit, down 0.3% at 161.35.
In other currencies, the euro fell 0.6% to $1.0884. There were no major economic data for Europe on Thursday.
Sterling also fell against the dollar, falling 0.4% to $1.2745.
In cryptocurrencies, Bitcoin fell more than 5% after earlier hitting a record high of $73,803. The last price was $69,381. Bitcoin exchange-traded funds and optimism that the Federal Reserve will cut interest rates this year have pushed the largest cryptocurrency to repeated record peaks.