On Thursday, the greenback soared a seven-week peak on increasing indications given by Fed Reserve Representatives that the U.S. central bank is extremely considering raising interest rates this month.
Later on Wednesday, Fed Reserve Governor Lael Brainard stated a developing global economy and a solid U.S. recovery mean it will be “appropriate soon” for the Fed rate hike.
The dollar index, which gauges the dollar against a basket of six major currencies, was a little higher at 101.91. The index increased to 101.97 on Wednesday, its highest since Jan. 11.
On Tuesday, two influential Fed officials, William Dudley and John Williams, stimulated greenback bulls with remarks that suggested rate-setters are concerned about waiting too long in the face of the pending economic stimulus from Washington.
“The Fed is likely to raise interest rates this month unless the U.S. jobs data due next week is bad,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.
Futures traders are now expecting a 66% probability of a Fed hike in March, up from 35% on Wednesday, according to the CME Group’s FedWatch Tool.
U.S. President Donald Trump’s long-awaited speech on Tuesday failed to give specific information on his economic ideas, but outlined broad tax reductions and a $1 trillion public-private initiative to rebuild degraded roads and bridges.
“Investors liked that Trump was behaving well during his speech, although it lacked specifics in policies,” said Daiwa’s Ishizuki.
The greenback increased up 0.3 percent, against its Japanese counterpart at 114.04 yen. The dollar reached a two-week peak of 114.16 yen earlier in the day.
A widening of U.S.-Japan interest rate differentials supported the dollar, as U.S. Treasury yields jumped on an increased prospect for a March rate hike.
The U.S. two-year yield increased near a more than seven-year high of 1.308% touched on Wednesday. The benchmark 10-year Treasury yield was also close to a two-week peak,the last standing at 2.461 percent.
However, some analysts warned that the greenback could decline in spite of the widening interest rate differentials should stocks retreat.
Investors are closely observing speeches from Fed Chair Janet Yellen and Vice Chair Stanley Fischer on Friday for additional policy indications.
The U.S. non-farm payrolls next Friday is another critical factor to decide on the probability of a March rate hike.
Sterling and the Canadian dollar weakened compared to the greenback to their lowest levels since Jan. 20.
On Wednesday, Canada’s central bank held rates steady, striking a cautious tone on the “significant uncertainties” facing the economy.
The dollar increased near a six-week high against the loonie, last standing at 1.3356 Canadian dollars.
Sterling dropped to a six-week low of $1.2261 as unsatisfactory economic data on Wednesday added to political nerves that have started to influence on the currency again after last year’s Brexit vote.
The euro declined 0.2% at $1.0529. On Wednesday, The common currency plunged to a one-week low of $1.0514 against the greenback.
The Australian dollar slumped on weaker than expected trade statistics, plunging 0.3 percent to $0.7654.
Australia’s trade excess decreased unexpectedly in January, though the quarterly current account might still edge into the black for the first time since the mid-1970s.
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