The dollar was up against all major peers Friday with a gauge of the currency wiping out its losses for the year, on growing bets for more Federal Reserve rate hikes.
The Bloomberg Dollar Spot Index went up as much as 0.3%, putting it on track to erase its losses for 2023, which at one stage exceeded 2.5%. The yen and New Zealand dollar fell among Group-of- 10 members, while Asia's emerging-market currencies fell, led by the South Korean won.
On Thursday, two of the Federal Reserve's most hawkish policymakers signaled that they may favor returning to bigger rate hikes in the future to vanquish inflation. In January producer prices rebounded more than expected, underscoring rising inflationary pressures that are increasing expectations of peak Fed rates.
David Forrester, senior FX strategist at Credit Agricole CIB in Singapore said that a 50 bp rate increase by FOMC hawks James Bullard and Loretta Mester is pushing UST short-end yields higher and taking the dollar along for the ride. The Fed believes that rates need to go higher in order to tame inflation because of strong US cyclical and inflation data. Air India makes record jet buys, as a result of Air India's aim to be the next Emirates.