Dollar set for third weekly gain as U.S. rate cut hopes fade

The dollar index was little changed at 99.36 and set for a 0.2% gain this week

The dollar was poised for a third weekly gain on Friday after positive U.S. economic data lowered expectations for rate cuts by the country’s central bank anytime soon.

The U.S. currency advanced overnight on a surprise drop in weekly jobless figures and was steady in Asian morning trade.

Fed funds futures have pushed back expectations for the next rate cut to June on the back of improving employment data and as central bank policymakers expressed concern about inflation.

The U.S. dollar is looking firmer to start the year, Kyle Rodda, an analyst at Capital.com, wrote in a note. Weekly U.S. jobless claims data, along with some manufacturing surveys, were better than expected, lowering the implied probabilities of imminent central bank rate cuts.

Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 198,000 for the week ended January 10, the Labor Department said on Thursday.

Chicago Fed President Austan Goolsbee said Thursday that amid ample evidence of stability in the job market, the central bank should be focused on getting inflation down.

Kansas City Fed President Jeff Schmid on Thursday called inflation “too hot” while San Francisco Fed President Mary Daly said that incoming U.S. economic data looks promising.

The dollar index, which measures the dollar against a range of currencies, was little changed at 99.36 and set for a 0.2% gain this week. The euro was steady at $1.1607.

The yen firmed 0.05% against the dollar to 158.58 per dollar, but is set to drop nearly 0.5% this week.

The Australian dollar was little changed against the dollar, trading at $0.6699. New Zealand’s kiwi firmed 0.05% to $0.5745.