On Friday, the dollar rose against most currencies after the appearance of the U.S. jobs data that might clear the path for the Federal Reserve’s rate hike.
On Thursday, Chair Jerome Powell joined Fed officials looking for a hawkish position, with Mary Daly (San Francisco Fed President) stating that it seems to be time to start making a plan to raise rates to fight inflation. Thomas Barkin, Richmond Fed President, indicated his support after the normalizing policy.
In the meantime, the continued spread of the new Omicron variant worldwide put pressure on risky currencies last week.
The dollar index, measuring the greenback against its six major peers, increased 0.3% to 96.284. That could be a sixth weekly increase, the longest extent since the beginning of 2015.
A market analyst at IG in Melbourne, Kyle Rodda, said that if you ignore the noise in the market now, driven by uncertainties around the new Omicron strain, the dollar is in a reasonably bullish cycle. He added that it seems that U.S. economic outperformance in the developed world is fixed for the moment. He also mentioned that the Fed will increase the pace of the tapering program at the end of this year while setting up rate hikes before the middle of 2022.
Money markets witness high chances of the Fed increasing the program.
On Wednesday, Powell repeated to Congress that he with other policymakers would consider faster action at their meeting in two weeks.
In a Reuters poll, economists estimate that the U.S. created 535,000 new jobs in November. MUFG analysts said that the Fed seemed surprised.
They also said that the situation might result in USD crosses returning to levels near 98.00 on DXY, while the EUR/USD go lower.
The dollar surged 0.3% to 113.41 versus the yen.
The euro dipped 0.2% to $1.1292, strengthening after its decline to an almost 18-month low at $1.1187 last week.
The Aussie fell 0.6% to a new 12-month low of $0.7056.