Dollar continues upward trend

The dollar firmed in Asian trading yesterday after data suggesting a pickup in US economic growth early in the fourth quarter increased chances of the Federal Reserve raising interest rates.

The dollar index, which tracks the greenback against a basket of six major peers, rose 0.1 percent to 101.77, pushing back toward its overnight high of 101.91, its highest in nearly 14 years.

US markets will be closed Thursday for the Thanksgiving holiday, while Tokyo markets were closed for a public holiday on Wednesday.

Investors are now pricing in a nearly 100-percent probability of a December Fed rate increase, according to CME FedWatch, and some investors expect more hikes next year if economic momentum is sustained.

“The momentum for the weaker yen could continue through the end of the year, since we are thinking the Fed will make two or three interest rate hikes in 2017,” said IHS Markit’s principal economist in Tokyo, Harumi Taguchi.

US data on Wednesday showed new orders for US manufactured capital goods rebounded last month on rising demand for machinery and equipment, while consumer sentiment rose this month following Donald Trump’s election which many viewed as positive for their personal finances and the economy.

The dollar has strengthened since Trump was elected president as US Treasury yields spiked on expectations that the new administration would boost debt- funded stimulus spending and stoke inflation.

Since Trump’s Nov. 8 victory, global bond markets have lost close to $2 trillion, according to Bank of America Merrill Lynch data.

“The dollar index is on an upward trend as the Trump euphoria continues,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust, although she noted it will eventually have a downside for the US economy.

“The strong dollar will undermine the US economy in the long run, especially the manufacturing sector,” she said.