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(Bloomberg) — The dollar stayed stronger against major peers as investors bet the Federal Reserve remains on track to raise interest rates this year while global peers retain unprecedented easing. The U.S. currency rose Monday as San Francisco Fed President John Williams reiterated policy makers could lift borrowing costs at any meeting, after employment indicators showed signs of recovering from a harsh winter. Trading patterns suggest momentum is turning after a gauge of the dollar slumped to a three-month low last week. By contrast, New Zealand’s dollar has been the worst performer in May as traders raised bets the local central bank will need to cut rates. “It looks like the downturn in the U.S. data was due to the winter weather, so the expectation now is for a rebound,” supporting the dollar, said Naohiro Nomoto, an associate for currency trading at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. A Fed rate increase is still likely this year, but “it’s really going to depend on the data,” he said. The dollar rose 0.1 percent to $1.1147 per euro as of 9:25 a.m. in Tokyo, adding to Monday’s 0.4 percent gain. It was little changed at 120.12 yen, holding the previous day’s 0.3 percent advance.
The Bloomberg Dollar Spot Index was at 1,169.18 after climbing 0.4 percent to 1,168.96 in New York. It touched 1,157.11 on May 6, a level unseen since Feb. 6. The gauge broke above its 10-day moving average on Monday, a sign that momentum may be shifting in the dollar’s favor following a drop of as much as 5.4 percent from the highest in data going back to 2004. Another measure known as slow stochastics crossed its signal line on May 7, indicating a potential bottom.
Swaps traders predict about 65 basis points of policy tightening by the Fed over the next 12 months, according to a Credit Suisse Group AG index. That compares to 43 basis points of easing at the Reserve Bank of New Zealand.
The New Zealand dollar has tumbled 3.7 percent against the greenback so far this month, to 73.38 U.S. cents.

–With assistance from Mika Otsuka in New York.

To contact the reporter on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda