February 28, 2018 / 3:52 PM / a year ago

FOREX-Dollar touches five-week high on U.S. rate outlook

    * Fed chair's testimony read as striking hawkish tone
    * Weaker-than-expected U.S. data fails to tarnish dollar
    * Euro zone inflation slows, clipping euro bulls
    * Yen edges higher after BoJ trims super-long JGB buying

 (Recasts, adds comment, FX table, updates prices, changes
byline, dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Feb 28 (Reuters) - The dollar rose to five-week
highs on Wednesday, bolstered by an upbeat assessment of the
U.S. economy from the Federal Reserve's new chairman, which
raised expectations the central bank could aggressively increase
interest rates over the next two years.
    The greenback in February was on track to post its best
monthly performance since November 2016.
    Also helping the dollar was a euro that fell to six-week
lows after euro zone inflation slowed to a 14-month low,
underlining the European Central Bank's caution in removing
stimulus in the region.
    The dollar also rose to three-week highs against the Swiss
franc, a two-week peak versus sterling and a two-month high
against the Canadian dollar.
    "The dollar has found tailwinds in America's sturdy economy
and its hawkish central bank," said Joe Manimbo, senior market
analyst, at Western Union Business Solutions in Washington.
    Fed Chairman Jerome Powell struck an optimistic tone about
the U.S. economy on Tuesday, fueling views the U.S. central bank
would raise rates four times this year rather than three.
    Slightly disappointing U.S. data on Wednesday - a
lower-than-expected second estimate of gross domestic product
for the fourth quarter and a weaker-than-forecast report on the
U.S. Midwest manufacturing sector - failed to dent the dollar's
    Data showed U.S. GDP expanded at a 2.5 percent annual rate
in the fourth quarter, instead of the previously reported 2.6
percent pace, declining from the third quarter's brisk 3.2
    The Chicago purchasing management index was a
weaker-than-expected 61.9 in February, compared with a consensus
forecast of 64.2.
    In midmorning trading, the dollar index rose 0.3 percent to
90.687, after earlier notching a five-week peak.
    Meanwhile, the euro has stumbled after a strong start to the
year in which investors speculated that ECB would withdraw
stimulus. The euro fell to a six-week low and was last down 0.3
percent at $1.2189.
    Political developments are also making euro investors
cautious. Italians are preparing to vote in a national election
on Sunday, while the leading political parties in Germany decide
on a coalition deal that would secure Angela Merkel a fourth
term as chancellor. 
    Against the yen, however, the dollar fell 0.3 percent to
106.98 yen.
    The yen rose after the Bank of Japan on Wednesday trimmed
the amount of super-long Japanese government bonds it offered to
buy at its regular debt-buying operation.
    The yen, a safe-haven currency that attracts demand in times
of economic uncertainty, also held firm after weak factory data
from China undermined investor risk appetite.

    Currency bid prices at 10:43AM (1543 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
 Euro/Dollar      EUR=        $1.2191        $1.2231     -0.33%         +1.63%      +1.2241     +1.2189
 Dollar/Yen       JPY=        106.8500       107.3100    -0.43%         -5.17%      +107.5200   +106.8300
 Euro/Yen         EURJPY=     130.28         131.29      -0.77%         -3.62%      +131.5100   +130.2700
 Dollar/Swiss     CHF=        0.9436         0.9388      +0.51%         -3.15%      +0.9443     +0.9388
 Sterling/Dollar  GBP=        1.3779         1.3907      -0.92%         +1.98%      +1.3915     +1.3780
 Dollar/Canadian  CAD=        1.2809         1.2774      +0.27%         +1.84%      +1.2812     +1.2761
 Australian/Doll  AUD=        0.7791         0.7789      +0.03%         -0.13%      +0.7819     +0.7782
 Euro/Swiss       EURCHF=     1.1506         1.1485      +0.18%         -1.57%      +1.1530     +1.1486
 Euro/Sterling    EURGBP=     0.8846         0.8792      +0.61%         -0.42%      +0.8854     +0.8779
 NZ Dollar/Dolar  NZD=        0.7215         0.7234      -0.26%         +1.82%      +0.7242     +0.7211
 Dollar/Norway    NOK=        7.8833         7.8663      +0.22%         -3.94%      +7.9121     +7.8589
 Euro/Norway      EURNOK=     9.6118         9.6276      -0.16%         -2.40%      +9.6564     +9.6014
 Dollar/Sweden    SEK=        8.3026         8.2248      +0.62%         +1.23%      +8.3037     +8.2204
 Euro/Sweden      EURSEK=     10.1233        10.0605     +0.62%         +2.90%      +10.1366    +10.0561
 (Reporting by Gertrude Chavez-Dreyfuss; additional reporting by
Tommy Wilkes in London; editing by Jonathan Oatis)
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