The U.S. dollar finished the week 2.6% higher against the euro on Friday, recording its first weekly gain in four weeks.
On Friday, the euro EURUSD, -0.53% fell to $1.0603, its lowest level since before a March meeting of Federal Reserve policy makers. The single currency bought $1.0660 on Thursday.
After declining substantially last Friday after the Labor Department said the U.S. economy added about half as many jobs in March as market forecasters had expected, the dollar bounced back on Tuesday as trading volume returned to the market, along with European traders, many of whom were home for the Easter holiday.
The buck’s gains were reinforced by the release of minutes from a mid-March meeting of Federal Reserve policy makers, which showed that several of them had advocated for raising the Fed funds rate, its benchmark interest rate, in June.
The dollar shed 4.5% of its value against the euro during the previous three weeks, as assumptions about the strength of the U.S. economy relative to Europe’s were tested by a string of surprisingly weak U.S. economic data.
At the mid-March meeting, Federal Reserve policy makers surprised the market after a dot plot of their expectations about the pace of interest-rate increases showed the Fed would likely begin raising rates later than the market had expected. It also showed that rate increases would likely be more gradual than the market had expected.
“What had been a consolidation is turning back into a trend of dollar strength once more,” after the release Wednesday of minutes from the Federal Reserve’s March meeting, said Richard Perry, market analyst at Hantec Markets, in a note Friday.
“There have been some key breaks on major forex pairs that show the dollar bulls are regaining the upper hand. A spike higher in Treasury yields yesterday also backs this assertion,” he added.
The ICE U.S. Dollar Index DXY, +0.38% a key measure of the dollar’s strength against a basket of six currencies, rose 0.2% to 99.35. For the week, it was looking at a 1.8% advance, which would be its biggest since the week ended March 13, according to FactSet data.
In other currency trading, the dollar was buying 120.22 yen USDJPY, -0.31% versus ¥120.58 on Thursday, when the greenback hit a three-week high against Japan’s currency.
In a Friday speech, Richmond Fed President Jeffrey Lacker, a voting Fed policy maker, laid out his argument for why raising the Fed’s benchmark rate in June makes sense.
“In current circumstances, raising the funds rate target a notch or two is less like taking away the punch bowl and more like just slowing down the refills. We will still be spiking the punch—just not quite as rapidly as we have been,” Lacker said.