The U.S. dollar was on track for a third consecutive weekly gain on Friday, supported by stronger-than-expected economic data that reduced expectations for near-term interest rate cuts by the Federal Reserve.
The greenback advanced overnight after an unexpected drop in weekly jobless claims and held steady during Asian trading hours. Meanwhile, the Japanese yen continued to hover near levels that have previously prompted warnings of possible market intervention by Japanese authorities.
Markets have pushed back expectations for the first Fed rate cut to June, as improving labor market data and persistent inflation concerns keep policymakers cautious. Fed officials have recently stressed the need to ensure inflation is firmly under control before easing policy.
“The U.S. dollar is starting the year on a stronger footing,” said Kyle Rodda, an analyst at Capital.com. He noted that better-than-expected jobless claims and manufacturing data have lowered the probability of imminent rate cuts.
The dollar index was little changed at 99.36 and remained on course for a weekly gain of around 0.2%. The euro traded flat at $1.1607.
The yen strengthened marginally to 158.58 per dollar but was still set to post a weekly decline of about 0.5%. Japan’s currency has come under pressure amid expectations of more expansionary fiscal policies ahead of a potential snap election, while repeated warnings from officials about excessive currency moves have only provided temporary relief.
Data released on Thursday showed initial claims for state unemployment benefits fell by 9,000 to 198,000 for the week ended January 10, well below economists’ expectations of 215,000.
Chicago Fed President Austan Goolsbee said the central bank should prioritize bringing inflation down, citing continued stability in the labor market. Kansas City Fed President Jeff Schmid described inflation as “too hot,” while San Francisco Fed President Mary Daly said recent economic data has been encouraging.
In Europe, European Central Bank officials signaled that interest rates are likely to remain unchanged in the near term if the economy stays on its current path. Chief economist Philip Lane warned, however, that unexpected shocks could alter the outlook. The ECB has kept rates steady since ending its rate-cut cycle in June and has indicated no urgency to adjust policy.
The yen has also found limited support from expectations surrounding the Bank of Japan, with economists expecting the central bank to wait until July before raising interest rates again.
Elsewhere, the Australian dollar was little changed at $0.6699, while the New Zealand dollar edged up 0.05% to $0.5745. In cryptocurrency markets, bitcoin rose 0.2% to $95,760.92, while ether gained 0.8% to $3,323.82.
