Dollar holds gains as investors cheer U.S. economic outlook

By Ritu,

Capital Sands

The dollar began the week on a firm note on Monday as economic data pointed to strength right across the U.S. economy, reducing the likelihood of interest rate cuts.

The greenback held steady near a one-week high against the euro, at $1.1096, and just below an eight-month peak on the Japanese yen, at 110.19 yen per dollar.

Figures on Friday showed U.S. home building surged to a 13-year high in December, with retail sales also on the rise and a gauge of manufacturing activity rebounding to its highest in eight months.

Futures pricing suggests nobody thinks the U.S. Federal Reserve will cut rates when it meets at the end of the month.

The strength comes as European economic data points in the opposite direction. The German economy last week posted its weakest growth since 2013, while British inflation is anaemic and retail sales are sliding.

The pound edged lower on Monday to $1.3002, its weakest in a week. Against a basket of currencies, the greenback was steady at 97.620, a whisker below a three-week high hit on Friday .

Trade was tepid leading in to a U.S. holiday on Monday.

China, meanwhile, on Friday posted its slowest annual growth figure in almost 30 years, although December data showed revived business confidence and quickening factory output.

The Yuan held flat at 6.8643 per dollar in offshore trade , not far below a six-month high it reached last week.