Dollar rises amid Fed rate cut expectations, better-than-expected retail sales data

NEW YORK :The U.S. dollar gained against major currencies on Tuesday following better-than-expected retail sales data that showed underlying economic momentum while markets braced for interest rate moves from the Federal Reserve and other central banks.

Commerce Department data on Tuesday showed U.S. retail sales surpassed expectations by jumping 0.7 per cent in November, backed by an uptick in motor vehicle and online purchases.

Markets expect the Fed will deliver a 25-basis-point interest rate cut at the end of its two-day policy meeting on Wednesday, with futures implying a nearly 97 per cent chance of a cut, according to the CME's FedWatch tool.

Against the Swiss franc, the dollar edged lower by 0.2 per cent to 0.89270 in choppy trading, after hovering near its highest level since July. The euro, which is heading for a drop of nearly 5 per cent against the dollar this year, was down 0.24 per cent at $1.048825.

The U.S. dollar index - which tracks the currency against six others - rose 0.17 per cent to 106.97, after trading as high as 107.08 on the session.

"The market is trying to debate whether it's time to fade the dollar, which has had an incredible run this year," said Marvin Loh, senior global market strategist at State Street in Boston.

"But it seems hard to really push back against U.S. exceptionalism and a stronger dollar going into the new administration, whether we're talking about a Fed that will probably not seem as dovish as it did in September or the challenges that keep popping up in the emerging and developed markets that make the dollar a safe haven."

The pound sterling rose against the dollar after data showed British wage growth picked up more strongly than expected in the three months to October. The Bank of England will announce its rate decision on Thursday. The sterling strengthened 0.16 per cent to $1.27040.

The yen strengthened against the dollar, as markets have scaled back the chances of a rate hike by the Bank of Japan this week in favor of a move in January. It rose 0.42 per cent against the greenback to 153.52 per dollar.

The dollar weakened 0.06 per cent to 7.287 versus the offshore Chinese yuan, as dour expectations for Chinese economic growth pinned 10-year bond yields near record lows.

The Australian dollar weakened 0.6 per cent versus the greenback to $0.6332, while the Swedish crown weakened 0.76 per cent versus the dollar to 10.964. The Norwegian Krone was also down 0.56 per cent to 11.2052 against the greenback.

Sweden's Riksbank is expected to cut rates by as much as half a point this week, while Norges Bank will likely leave rates unchanged.

Bitcoin rose as high as $108,379.28, trading near the $110,000 mark, before paring gains and was up 0.68 per cent to $106,798.26.

"I think that the market is worried that they're going to be only two cuts in the (Fed's closely watched dot plot) next year; so it's a little bit dollar positive," said Steve Englander, global head of G10 FX Research and North America macro strategy at Standard Chartered Bank in New York.

Currency bid prices at 17 December​ 08:55 p.m.              

GMT

Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid

Dollar index 106.97 106.79 0.19 per cent 5.52 per cent 107.08 106.69

Euro/Dollar 1.0487 1.0514 -0.25 per cent -4.99 per cent $1.0536 $1.0479

Dollar/Yen 153.53 154.125 -0.56 per cent 8.66 per cent 154.245 153.185

Euro/Yen 161.01​ 162.03 -0.63 per cent 3.46 per cent 162.47 160.78

Dollar/Swiss 0.8928 0.8947 -0.21 per cent 6.08 per cent 0.8975 0.8916

Sterling/Dollar 1.2706 1.2684 0.16 per cent -0.17 per cent $1.2728 $1.2669​

Dollar/Canadian 1.4312 1.4243 0.5 per cent 7.98 per cent 1.4324 1.4233

Aussie/Dollar 0.6332 0.6371 -0.61 per cent -7.13 per cent $0.6378 $0.6332

Euro/Swiss 0.9361 0.94 -0.41 per cent 0.81 per cent 0.9417 0.9356

Euro/Sterling 0.8252 0.8286 -0.41 per cent -4.8 per cent 0.8295 0.825

NZ Dollar/Dollar 0.575 0.5783 -0.55 per cent -9 per cent $0.5793 0.5751

Dollar/Norway 11.2061​ 11.1429 0.56 per cent 10.56 per cent 11.2146 11.1343

Euro/Norway 11.7517 11.7229 0.25 per cent 4.7 per cent 11.774 11.7184

Dollar/Sweden 10.9697 10.8745 0.88 per cent 8.97 per cent 10.9713 10.8712

Euro/Sweden 11.5048 11.4389 0.58 per cent 3.41 per cent 11.5085 11.4402