The greenback has been on a bullish footing since Friday’s comments by Fed Chair Janet Yellen revived expectations the central bank could hike rates as early as September. The euro was also unchanged at $ 1.1177.
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“Enhanced expectations over a near-term USA interest rate hike and additional monetary easing in Japan are behind the dollar’s firmness” against the yen, said Minori Uchida, head of Tokyo global market research at the Bank of Tokyo-Mitsubishi UFJ.
She added the solid performance in the USA labor market and outlook for economic activity and inflation had strengthened the case in recent months for an increase in the federal funds rate.
Investors focus is now on Friday s key jobs creation report, which could be pivotal in the Fed s decision-making ahead of next month s policy meeting, although there are some reservations about whether a move will be made then.
But the dollar climbed back to levels around ¥102.20 later in the morning, supported by Japanese importers’ purchases and the Nikkei stock average’s upturn, they said.
US consumer confidence rose to an 11-month high in August, with households more upbeat about the labour market, data showed overnight. That probability would rise if the jobless figures are stronger than expected, showing USA employers continued their strong pace of hiring seen in recent months.
The growing prospect for an imminent rate hike lifted the dollar against major currencies such as the yen. “The factors that are contributing to the strong cyclical and secular U.S. dollar outlook remain”, including economic growth and the nation’s divergent monetary policy from other central banks.
Data released earlier on Wednesday showed Japanese industrial output was flat in July from June, underscoring fragility in factory activity and falling short of economists’ median forecast for a 0.8 percent rise.
BONDS, CURRENCIES: U.S. government bond prices rose.
STILL A BELIEVER: Herbalife added $1.39, or 2.2 percent, to $61.84 after Icahn said late Friday he had bought an additional 2.3 million shares in the supplements and weight-loss products company, and that he never gave an order to sell his $1 billion stake.
S&P 500 financials closed at their highest level since early December, right before the Fed raised interest rates for the first time in almost 10 years. South Korea’s Kospi added 0.8 percent to 2,047.93 in early trading.
Asian stocks closed mostly higher on Tuesday, as higher commodity prices and a firm lead from Wall Street on signs of strength in the American economy bolstered investors’ appetite for risk.
ENERGY: Benchmark U.S. crude oil fell 82 cents to $46.82 a barrel. On Wall Street, the Dow ended Monday up 0.58 per cent, while the S&P 500 added 0.52 per cent and the Nasdaq 0.26 per cent. Financials were the best performer on the S&P 500, with Wells Fargo up 2.2 percent.
Brent crude was down 0.1 per cent at $48.31 per barrel after shedding 1.8 per cent on Tuesday.
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The “natural” rate of interest – the real rate consistent with full use of economic resources and steady inflation near the Fed’s target level – was near zero and would rise to only 1 percent over the next decade.
