By Karen Brettell
NEW YORK (Reuters) – The dollar hit its highest level since early November against a basket of currencies on Monday and pushed the yen to its lowest level since 1990, after U.S. retail sales rose more than expected in March.
Retail sales rose 0.7% last month and February data was revised upward to show a sales rebound of 0.9% rather than 0.6% as previously reported. Economists polled by Reuters had forecast that retail sales, which mainly involve goods and are not adjusted for inflation, would rise 0.3% in March.
The greenback gained ground as still sticky inflation and strong growth lead investors to push back expectations about when the Federal Reserve is likely to start cutting rates. The US central bank also now plans to make fewer cuts than in the past.
“The U.S. data continues to be consistently better than expected,” said Brad Bechtel, global head of FX at Jefferies in New York.
Traders are now pricing in fewer than two 25 basis point cuts by the end of the year, after having expected three.
New York Fed President John Williams said Monday that Fed policy is on track and remains tight, adding that his view is that interest rate cuts will likely begin this year.
The Japanese yen, in particular, has suffered from the strength of the US dollar and the wide interest rate differential between the two countries.
Japanese monetary officials have stepped up warnings that they may intervene to support the currency. Finance Minister Shunichi Suzuki said Monday that he was closely watching currency movements, reiterating that Tokyo was “fully prepared” to act.
Bechtel believes any potential intervention is more likely if the yen underperforms, rather than during episodes of broad-based dollar strength.
“I think we still need a big day where the yen underperforms the market by 1% or more,” he said, adding that Japanese officials could also intervene at a key level like 155.
The dollar gained 0.59% against the Japanese currency to 154.19, after touching the 154.45 level.
It reached 106.23, its highest since Nov. 2, and rose 0.24% to 106.20.
Investors are also focused on escalating tensions in the Middle East, seen as increasing demand for the safe-haven U.S. dollar.
Israel faced growing pressure from allies on Monday to show restraint and avoid an escalation of the Middle East conflict as it considered how to respond to the weekend’s Iranian missile and drone attack.
The euro fell to $1.0622, its weakest level since Nov. 3, and fell 0.18% to $1.0623.
Last week the single currency recorded its biggest weekly percentage drop since late September 2022, when the European Central Bank left the door open to a rate cut in June.
The Australian dollar also fell to $0.6441, its lowest since Nov. 14.
In cryptocurrencies, it fell 6.24% to $62,950.00. It reached $61,323 on Saturday, its lowest since March 20.