The US dollar edged higher against a basket of major currencies on Friday, extending its recovery from a three-year low last week, as the potential for a more aggressive US Federal Reserve prompted investors to pare bearish bets against the greenback.
The US dollar index, which measures the greenback against a basket of six other major currencies, rose 0.12 percent to 89.847. It is up 1.8 percent from last week’s 88.253, a three-year low.
“You have seen sentiment around the dollar shift,” said Charles Tomes, senior investment analyst and trader at Manulife Asset Management in Boston.
“A lot of market participants are taking some risk off the table if they did have longs in other strategies,” he said.
Rising US Treasury yields, a view that the US dollar’s selloff had been overdone, and minutes from the Fed’s rate-setting meeting last month that offered a relatively upbeat tone helped the index notch a gain of 0.8 percent this week.
The Fed, looking past a recent stock market sell-off and concerns about US inflation, sees steady growth continuing and no serious risks on the horizon the might pause its planned pace of rate hikes, the central bank’s Washington-based Board of Governors wrote in its semiannual report to the US Congress on monetary policy.
The report was released on Friday ahead of new Fed Chairman Jerome Powell’s first public outing on Tuesday, when he testifies separately before US House of Representatives and Senate committees.
In Taipei, the New Taiwan dollar on Friday fell against the US dollar, losing NT$0.005 to close at NT$29.306, but is up 0.1 percent from Wednesday’s NT$29.342.
The euro edged lower against the US dollar, pressured by the greenback’s stronger tone and by investor caution ahead of the outcome of the Italian general election on Sunday next week. The common currency traded near US$1.23 on Friday, down 0.9 percent from last week’s US$1.24096.
A German Social Democrats’ poll of its members on joining another coalition government with German Chancellor Angela Merkel’s conservatives is also due that day, two big political risk events for markets.
“For people that are bullish on the euro, there is nothing new to get people to increase positions,” Tomes said.
The kiwi slipped as investors bet interest rates in New Zealand will remain at record lows while the US continues to tighten policy.
The Canadian dollar rose against the greenback after data showed Canada’s inflation cooled less than economists had expected.
Additional reporting by CNA and staff writer
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