© Reuters. FILE PHOTO: A poster promoting Chinese renminbi (RMB) or yuan, US dollars and euros offshore exchange services at a foreign exchange shop in Hong Kong, China August 13, 2015. REUTERS/Tyrone Siu/File Photo
Written by Chuck Mikolajczak
NEW YORK (Reuters) – The dollar rose for a fourth straight session on Thursday against a basket of major currencies, hitting a two-month high, as US economic data indicated resilience even after the Federal Reserve’s aggressive rate hike cycle.
Initial weekly jobless claims rose by 4,000 last week to 229,000, less than a Reuters estimate of 225,000 while data from the previous week was revised sharply lower, indicating the labor market remains strong. In addition, the second estimate of first quarter GDP growth confirmed that the economy is slowing but the 1.3% increase was revised up from the preliminary reading of 1.1%.
In contrast, the German economy, the largest in Europe, was in recession in the first quarter as GDP fell by 0.3%, dragging down the euro. The dollar reached a two-month high, also boosted by safe-haven demand as concerns about defaults mounted in the United States.
“A lot of that has to do with the US economy having some wind in the back compared to what’s going on abroad. And the data today really highlights the difference we’ve seen in growth prospects across the Atlantic,” said Joe Manimbo. , senior market analyst at Convera in Washington, D.C.
“Hotter data keeps the door wide open for the Fed to move again in June and that’s a big shift because a month ago there was a sense that there was a risk the Fed would cut rates instead of pausing so it’s a big shift in the interest rate outlook.”
It rose 0.27% at 104.100 after reaching 104.27, its highest since March 17th. The four-day winning streak would be the longest since late February.
The euro fell 0.2 percent to $1.0727.
The probability of a 25 basis point rate hike from the Fed at its June meeting is about 42%, according to CME’s Fedwatch Tool, up from about 36% on Wednesday.
Recent comments from Fed officials indicated that members are divided on whether or not they should continue to raise rates. Boston Federal Reserve Chair Susan Collins said on Thursday that it may be time for the US central bank to stop the cycle of rate hikes.
Concerns about a possible US default supported the dollar as talks continued in Washington to raise the $31.4 trillion debt ceiling. The Treasury Department has warned that it will not be able to pay all of its bills on June 1 if the cap is not increased.
Fitch placed the US debt ratings “AAA” on negative watch, a precursor to a possible downgrade if lawmakers fail to reach an agreement. In addition, credit rating agency DBRS Morningstar put the US under review for a downgrade on Thursday.
Kevin McCarthy, a senior Republican congressman, said Thursday that negotiators from the White House and Republicans had made some progress in the late-night talks.
The Japanese yen fell 0.18% against the dollar, to 139.70 per dollar, while the pound sterling was last traded at $1.2347, down 0.14% on the day.