Dollar surged in European trade to a three-week high against a basket of major rivals, resuming strong gains as US 10-year treasury yields muscled up as well.
Dollar is heading for the biggest weekly profit since May 2023 amid aggressive short-covering, and after the odds for an early US interest rate cut at the Fed March meeting declined.
Now investors await the crucial US payrolls report later today to get better clues on the path ahead for US monetary policies.
The Index
The dollar index rose 0.4% today to 102.80, the highest since December 13, with a session-low at 102.35, after losing 0.1% yesterday, the first loss in five days on profit-taking.
Weekly Trades
The index is up 1.4% so far this week, on track for the best weekly profit since May, and the first such profit in a month.
US Treasury Yields
US 10-year treasury yields rose 1.1% on Friday, hitting three-week high at 4.050% and underpinning the greenback.
The Federal Reserve's December 13 meeting minutes showed that policymakers believe interest rates should remain high for an extended duration.
Members believe that interest rate cuts would be more appropriate by the end of the year.
Recent US data showed the private sector added 164 thousand new jobs in December, beating estimates of 120 thousand easily.
US unemployment claims fell to 202 thousand last week, below estimates of 217 thousand.
US Rates
Following the release of the Federal Reserve's December meeting minutes and the strong labor data, the odds of the first US interest rate cut in March 2024 fell to 65%.
Payrolls Data
Now investors await the crucial US payrolls report later today to gauge the likely path ahead for monetary policies.
The US economy is expected to have added 168 thousand new jobs last month, down from 199 thousand in November, while unemployment are expected up to 3.8% from 3.7%.
Obviously strong data will showcase the strength of the US economy and probably delay the timeline of interest rate cuts this year, underpinning the dollar, and vice versa.
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