Surging dollar set for weekly gain as US data, Fed push back on rate cuts

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Surging dollar set for weekly gain as US data, Fed push back on rate cuts
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SINGAPORE - The resurgent dollar headed towards a second straight week of gains on Friday as a hotter-than-expected U.S. economy has pushed back investors' and policymakers' expectations of the trajectory of Federal Reserve rate cuts this year.

"Given the recent developments, the prospect of a joint Asian FX intervention is definitely rising. I'm not sure about whether or not the U.S. will be involved in that intervention, because ultimately, a stronger U.S. dollar will just help the FOMC's inflation fight." BOJ Governor Kazuo Ueda said on Thursday the central bank may raise interest rates again if the yen's declines significantly push up inflation, highlighting the impact currency moves may have on the timing of the next policy shift.

"Once the ECB starts cutting, it'll be apparent that global central banks will face divergent monetary policy easing cycles, and that will just exacerbate the strength in the dollar against the euro and other major currencies," said CBA's Kong. That's also resulted in Fed policymakers pushing back on bets for U.S. rate cuts beginning as early as June, and Chair Jerome Powell early this week similarly said monetary policy needs to be restrictive for longer.

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