US dollar, Yen see advances

Story link: US dollar, Yen see advances

The US dollar was up on Monday amid expectations that US interest rates will rise further in the foreseeable future. The greenback gained 0.5 percent in relation to the euro, to $1.1971. It was up 0.9 percent to $1.7467 against sterling, a one-month high. However, the dollar held steady in relation to the yen at ¥118.90.

Analysts at Goldman Sachs repeated the view that US interest rates will hit 5 percent and raised its estimate of first quarter growth of the gross domestic product to 4.5 percent, from a previous estimate of 3.5 percent GDP growth. Other estimates of interest rate hikes see the rates going even higher. Brown Brothers Harriman said that it believes interest rates will reach a level somewhere between 5 and 5.5 percent. These conditions are expected to support the dollar.

However, Citigroup feels that the dollar has gone about as high as it will go, citing rising Treasury yields, a slowing housing market in the US, and the impending announcement of a new record high US trade deficit as being dollar-negative.

Meanwhile, sterling was down 0.4 percent in relation to the euro, to £0.6854 on rumors that retail sales data from the British Retail Consortium, to be released today, will be soft.

The Japanese yen was up on the day, rising 0.5 percent to ¥142.34 in relation to the euro. The Japanese currency also gained 0.8 percent against sterling, to ¥207.70, and was up 0.9 percent to ¥88.29 in relation to the Australian dollar. These gains were put to December’s index of leading economic indicators in the Asian nation, which hit 80, much above the break-even mark of 50. This was taken as an indication that the Japanese economy will continue to grow over the next half-year.