USD: Dollar hits 5-month high

The US Dollar (USD) hit its highest in almost five months on Tuesday as stronger-than-expected economic data caused investors to rein in their bets on a June rate cut, boosting the currency.

Fears of intervention by Japanese officials slowed the dollar’s gains against the yen, however, even as long-term U.S. Treasury yields – which the currency pair tends to track – jumped to a two-week top overnight.

The dollar index rose to 105.1 on Tuesday, its highest level since Nov. 14, adding to sharp gains on Monday after U.S. data unexpectedly showed the first expansion in manufacturing since September 2022. It last stood at 104.92, down very slightly.

The euro fell to its lowest since mid-February at the end of the Asian session but was last little changed at $1.0745 . Data on Tuesday showed that the euro zone factory downturn deepened again in March.

Sterling ticked up from near its lowest since December to $1.2563 after data showed its manufacturing sector brightened last month.

Monday’s U.S. ISM manufacturing survey data featured a sharp rise in a measure of prices in the sector, adding to investors’ concerns that inflation will be slow to fall back to 2%, delaying the Federal Reserve’s first rate cut.

Fed Chair Jerome Powell on Friday said the central bank was in no hurry to lower borrowing costs after data showed a key measure of inflation rose slightly in February.

“This (dollar) strength is an extension of the move seen late last week when the Federal Reserve’s Christopher Waller delivered a less dovish speech,” said Chris Turner, head of global markets at ING.

Turner said U.S. job openings data could weigh on the dollar later in the day if it shows a fall in vacancies.

“Any reversal in this dollar strength – if it does come – will have to be data-driven,” he said.