Dollar gains on Fed official remarks, stays firm vs yuan after Biden-Xi talk

US dollar and Japan yen notes are seen in this photo illustration June 2, 2017. REUTERS/Thomas White/Illustration

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  • Dollar stays higher against offshore yuan after Biden-Xi talk
  • Dollar rises vs yen following BoJ
  • Euro has biggest weekly gain in 6 wks

NEW YORK, March 18 (Reuters) – The US dollar index bounced back on Friday from recent declines as Federal Reserve officials said the central bank may need to be more aggressive to deal with inflation, while the dollar hit a fresh six-year high against the yen.

The US dollar also was up 0.1% versus China’s offshore yuan at 6.3716 yuan, registering little change following US President Joe Biden’s video call with Chinese President Xi Jinping, where Biden sought to prevent Beijing giving new life to Russia’s invasion of Ukraine. The talks, which ended without big surprises, helped to boost stocks on Wall Street, however, especially in the technology sector. read more

Two of the Federal Reserve’s most hawkish policymakers said the central bank needs to take more aggressive steps to combat inflation. A third, who just six months ago was the US central bank’s most dovish member, said he was open to that possibility. read more

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The Fed hiked interest rates by a quarter of a percentage point Wednesday in an effort to tame inflation at 40-year highs. It was the first hike in three years, and the Fed also reported that more rate increases are coming.

St. Louis Fed President James Bullard, who dissented on this week’s action in favor of a half-point increase, said on Friday that officials should raise the Fed’s overnight lending rate to more than 3% this year.

“For the dollar, hawkish Fed speak has put some wind back in its sails,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

“It’s playing up the more hawkish outlook for Fed policy. While the Fed was hawkish this week, their outlook for rates was still generally in line with market expectations.”

The US dollar index was last up 0.2% at 98.190, but well off its highs of the session, after declining for the past four days.

The dollar was up 0.4% against the Japanese yen and hit a fresh six-year high. The Bank of Japan left its ultra-accommodative policy settings unchanged on Friday, as widely expected, leaving it an outlier among developed-world central banks which are exiting coronavirus pandemic emergency measures. read more

The euro weakened as investors assessed developments in the Ukraine-Russia conflict, including news that Russia paid interest due on two sovereign dollar bonds.

The euro declined 0.4% to $1.1054 but rose 1.3% for the week in its biggest weekly percentage gain since the first week of February, when European Central Bank President Christine Lagarde signaled for the first time that interest rates will rise in the euro zone in 2022 .

The commodity-sensitive Australian dollar was up 0.5% against the US dollar, extending gains for a fourth day. Oil prices settled higher on Friday, but posted a second straight weekly loss.

In cryptocurrencies, bitcoin was up about 2% and ether was up about 5%.

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Currency bid prices at 3:21PM (1921 GMT)

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Reporting by Caroline Valetkevitch; additional reporting by Saikat Chatterjee in London and Kevin Buckland in Tokyo; editing by Robert Birsel, Jason Neely and Jonathan Oatis

Our Standards: The Thomson Reuters Trust Principles.

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