Dollar Rises From 3-Month Low as U.S. Consumer Boosts Rate Bets

  • Retail sales exceed forecasts with December data revised up
  • Greenback climbs from weakest since Oct. 2014 versus yen

The dollar rose from near a three-month low as signs the U.S. consumer remains strong added to the case for interest-rate increases this year.

The greenback advanced versus most of its major peers as a Commerce Department report showed retail sales increased more than forecast in January, following a revised gain a month earlier. The currency snapped four days of losses versus the yen, rising from its weakest since October 2014 on signals the loss may have become overdone.

Federal Reserve Chair Janet Yellen showed no sign that she regrets raising rates for the first time in a decade when she addressed Congress this week, instead reiterating that the central bank is watching incoming data and plans to raise rates gradually. That helped the dollar pare a third weekly loss fueled by concern about a global slowdown and the creditworthiness of some European banks that had dimmed the outlook for tighter U.S. monetary policy.

“While the U.S. consumer may not be in a position to come to the rescue of the global economy, it still may be strong enough to keep the U.S. relatively well-performing,” said Omer Esiner, chief market analyst at currency brokerage Commonwealth Foreign Exchange Inc. in Washington. “As the data comes out, and if it continues to suggest relative strength in the U.S., then you could start to build a case for a floor in the dollar,” he said.

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, added 0.2 percent to 1,219.36 as of 5 p.m. in New York, after touching its lowest since Nov. 4 on Thursday.

The U.S. currency added 0.7 percent to 113.25 yen and climbed 0.6 percent to $1.1256 per euro.

Stretched Values

Traders pushing out expectations for a U.S. rate increase this week fueled a dollar selloff that may be stretched.

A measure of the greenback’s momentum against the yen, known as the 14-day relative strength indicator, dropped below 30, the level that some traders view as a signal the currency has reached extreme levels and may reverse. A similar gauge for the currency versus the euro also remains near a level that suggests weakness is extreme.

Hedge funds and other large speculators cut wagers on dollar strength to a net 176,872 contracts in the week ending Feb. 9, data from the Commodity Futures Trading Commission show. That’s down from 265,159 a week earlier, and the least since October.

Retail sales rose 0.2 percent in January, and a 0.1 percent contraction in December was revised to a 0.2 percent gain. An inflation report due next week will show that core consumer prices climbed from a month earlier, according to a Bloomberg survey of 77 analysts.

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