The dollar rose to a four-month high against a basket of major currencies on Tuesday after the release of data showing US housing starts rose more than expected in June, underpinning a theme of strength in the USA economy.
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Fed funds futures rates show investors see nearly a 50/50 chance that the USA central bank raises rates by its December meeting, according to CME Group’s FedWatch tool, compared with less than 20 per cent a few weeks ago. “Currency markets will now be focused on the second-quarter inflation data on July 27, which if it undershoots as it did in New Zealand, would put the Australian dollar under selling pressure”.
The dollar eased 0.4 per cent to 105.79 yen, after hitting 106.33 yen, the greenback’s highest level since June 24. – AFP picTOKYO, July 20 ― The dollar firmed in early Asian trading today, as strong USA data and rising expectations that the Bank of Japan will muster additional easing steps sent the dollar index to four-month highs.
“The market will recalibrate on Fed rate-hike expectations to price in at least one” this year, said Charlie Lay, a foreign-exchange strategist in Singapore at Commerzbank AG. The euro was last down 0.5 percent at $1.1017. “Most recently the rising rate hike expectations are mainly due to better economic and inflation developments in the U.S.”.
Speculators have also been unwinding their safe-haven bids in the yen as the initial shocks from the Brexit vote dissipated, and expectations rose of additional easing from the Bank of Japan at its July 28-29 meeting.
Indications the Bank of Japan will pursue additional monetary easing, possibly in conjunction with the Japanese government, have weighed on the yen with a majority of economists polled by Reuters expecting further BOJ easing.
The Australian dollar fell to near 2-week lows of 0.7509 against the US dollar, 1.4738 against euro and against the Canadian dollar, from yesterday’s closing quotes of 0.7590, 1.4586 and 0.9824, respectively.
The euro slipped to US$1.1023, near the low end of its range for the last four months, helped by the surprise fall to a four-year low of Germany’s Zew investor confidence index.
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“The ECB governing council is unlikely to say anything supportive of the currency at its Thursday meeting”, said John Hardy, head of currency strategy at Saxo Bank.
