Dollar on track for first weekly gain in three months after Fed minutes

Dollar on track for first weekly gain in three months after Fed minutes

Greenback is on pace for its first weekly gain in three months.

NEW YORK, Jan 6, Reuters - The U.S. dollar edged up after a flurry of economic data, including weekly labor market numbers, went up a bit on Thursday after the release of minutes from the Federal Reserve's December meeting.

The dollar was down by 0.44% late Wednesday after the minutes showed that Fed policymakers were concerned about rising inflation, which could lead to the Fed raising rates sooner than anticipated, along with a reduction in its asset holdings.

According to the CME FedWatch Tool, traders are anticipating a greater than 70% chance of a rate hike of at least 25 basis points at the March Fed meeting.

The market is paying attention more to monetary policy and that discrepancy, and that is what is driving the dollar, said John Kicklighter, analyst at in Chicago. If you are already pricing in the most aggressive, hawkish view you're going to get, then how much more is the dollar going to go? St. Louis Fed President James Bullard said that the Fed could raise rates as soon as March and is in a good position to be aggressive against inflation as needed.

The U.S. labor market data shows weekly initial jobless claims increased by 7,000 to a seasonally adjusted 207,000, slightly above the 197,000 forecast. The data comes after a very strong private payrolls report on Wednesday in the ADP National Employment report and ahead of Friday's December payrolls report, which could bolster expectations that the Fed will hike rates.

San Francisco Fed President Mary Daly said the central bank should raise interest rates this year, given the strong labor market and high inflation acting as a repressive tax that acts as a burden, particularly on the poor.

The U.S. trade deficit went up sharply in November to $80.2 billion, indicating a potential weight on fourth-quarter economic growth, according to other data.

Analysts believe that 96.40 for the dollar index is a technical resistance point, with a break above likely to result in a December high of 96.91.

According to a report from the Institute for Supply Management, activity in the U.S. services sector slowed more than expected in December due to a rise in COVID 19 infections. The new Omicron variant is viewed by investors as unlikely to crimp economic activity.

The euro was down by 0.17% to $1.1294 as the annual inflation in Germany slowed for the first time in six months but remained well above the European Central Bank's 2% target in December, according to preliminary data released on Thursday.

The Japanese yen was up 0.26% against the dollar at 115.82 per dollar, while the dollar was trading at $1.3532, down 0.16% on the day. On Wednesday, the pound was at a two-month high of 1.3598.

The last time in cryptocurrencies fell to $43,400 was 0.08%.