NEW YORK (Reuters) - The dollar rose broadly on Friday after mostly upbeat U.S. economic data renewed some expectations that the Federal Reserve could raise interest rates again this year.
The dollar index, a measure of the greenback’s value against six major currencies, posted its best weekly performance since November. Against the Japanese yen, the dollar rose to a more than one-week high.
Friday’s data showed that U.S. economic growth slowed in the fourth quarter, but not as sharply as anticipated, while consumer spending rose. Those reports, if followed by another robust U.S. nonfarm payrolls report next week, should put rate hikes back on the Fed’s agenda.
“The dollar’s move today is almost entirely attributed to the data, which was an upside surprise,” said Jason Leinwand, managing director at Riverside Risk Advisors in New York.
“The market was lightly positioned, looking for and confident that the Fed won’t do anything and expecting the data points to support that, but this (Friday’s data) showed that’s not the case.”
The dollar index .DXY rose 0.86 percent to a three-week high of 98.260. The euro EUR= was down 0.8 percent against the dollar at $1.0931 after falling to a three-week low of $1.0912.
Helping the dollar was a report showing U.S. consumer spending rose 0.5 percent last month, higher than the forecast of a 0.3 percent gain. More importantly, the core PCE index, an inflation indicator keenly watched by the Fed, inched higher to 0.3 percent.
“We’re finally starting to see the effects of lower energy costs and stronger wage growth coming through in actual consumer spending,” said Brian Dolan, head market strategist at DriveWealth LLC in Chatham, New Jersey.
“Taken together, it’s a good start for the year and should go a long way to dispelling fears of a consumer-led slowdown.”
Sterling hit a seven-year low against the dollar on worries about a British exit from the European Union, which left the currency on track for its biggest weekly loss since 2009.
The dollar climbed 0.77 percent to 113.990 yen JPY=, breaking the Japanese currency's streak of gains. The yen, however, was still on track for its best month in more than seven years.
Reporting by Tariro Mzezewa and Gertrude Chavez-Dreyfuss; Editing by James Dalgleish and Richard Chang