The dollar surged on Friday to hit a six-week high against a basket of currencies as a bout of resilient economic data out of the United States raised market expectations that more interest rate hikes were in the offing.
Data on Thursday showed that the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, while other data revealed that monthly producer prices increased by the most in seven months in January.
The latest data releases gave the US dollar a leg up, knocking sterling to a fresh six-week low of $1.1952 on Friday.
This left the rand at its weakest level in more than three months. On Friday morning, the currency was trading at R18.24/$.
Similarly, the kiwi tumbled to a six-week trough of $0.6228, while the euro bottomed at $1.0652, its lowest since Jan. 9.
Against a basket of currencies, the US dollar index rose to a fresh six-week top of 104.31 and was on track for a third straight week of gains.
“The US economy, from recent data, shows that it’s still healthy. It doesn’t seem to be going into a recession any time soon,” said Tina Teng, market analyst at CMC Markets.
“The markets are pricing for higher-for-longer rates.”
Thursday’s reports followed data from earlier this week, which showed robust growth in US retail sales in January and signs of sticky inflation, stoking fears that the Federal Reserve would have to raise rates higher than previously expected.
US Treasury yields have also surged on the back of further hawkish rate repricing, with the two-year yields last at 4.6762%.
The benchmark 10-year US Treasury yield climbed to a high of 3.900% on Friday, its highest since Dec. 30.
Markets are now expecting rates to peak just below 5.3% by July.
Fed officials have also signalled that the US central bank has further to go in raising rates, with two policymakers saying on Thursday that the Fed likely should have lifted interest rates more than it did early this month.
Elsewhere, the Aussie slid 0.46% to $0.6848, languishing near Thursday’s more than one-month low of $0.68405.