The dollar strengthened once again on Friday as the possibility of a Fed rate hike on March 15 loomed nearer, encouraging traders to purchase dollars. The dollar traded at 114.18 yen on Friday morning, while the euro eased to $1.0515, testing support levels of $1.0492 set in February. Federal Reserve Chair Janet Yellen is set to speak later on Friday and is will likely provide the strongest indicator as to whether there will be a rate hike later this month.
The stronger dollar troubled commodity prices on assets linked to the dollar. Gold traded at $1,233.50 on Friday morning following Thursdays steepest one-day drop since December.
U.S. stocks retreated from their record highs on Thursday, a move which likely resulted both from profit-taking and from an official search of the Illinois Caterpillar facilities which sent the company’s stock down 4.3 percent and dragged down the entire Dow.
Data Speaks Loudly
Reports out from the U.S. Labor Department on Thursday showed that the number of Americans filing for unemployment last week fell to a near 44-year low. This was the 104th consecutive week that unemployment claims remained below 300,000, the threshold that indicates a healthy labor market. This strong data is expected to weigh the Fed’s decision more strongly towards a near-term rate hike.
On Friday, reports about Japan’s core consumer prices sowed that household spending declined in January even as the job market rebounded. Japan’s core consumer prices rose for the first time in more than a year due to an increase in private consumption and energy costs. This move gave some optimism that the Bank of Japan may finally be on its way to reaching its 2 percent inflation target and to finally reversing the plague of low inflation that has been troubling the country for nearly twenty years.