The dollar headed for its first monthly advance against the yen since May on mounting speculation USA monetary policy will further diverge from that of the Bank of Japan.
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The dollar has been “supported by the recent, more hawkish comments from the Fed which have signaled that the Fed is moving closer to resuming rate hikes”, said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd in London. “It depends entirely on what happens in the economy”, Fischer said. He declined to give any insight into exactly what the Fed’s timetable for raising rates might be, or what specific data points they’re looking at to help determine policy.
The stronger US Dollar will be supportive for Australian stocks like CSL and James Hardie with large US investments. The dollar was little changed today at US$1.1144 (RM4.53) per euro, having gained 0.3 per cent since the end of July. Fed Vice Chairman Stanley Fischer said early on Tuesday that the United States job market is close to full strength and it is impossible to say whether the next interest rate hike would be “one and done”, according to media reports.
It was the only economic indicator on the U.S. docket today.
The prospect of the next increase in USA interest rates is helping to entrench equity markets in a low volatility, stable trading range.
Now the odds of a September increase are still seen as fairly low – December is seen as far more likely and there are still those who aver that even a December rate hike is too soon.
The Bloomberg Dollar Spot Index, which tracks the United States currency against its 10 major peers, was little changed today.
Dollar disappointment may be near an end as recent commentary from Fed Chair Janet Yellen and other members of the US central bank indicate an increasing level of comfort with the idea of raising borrowing costs sometime over the next several months.
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“The greenback snapped a two-week losing streak after Fed Chair Janet Yellen said the case to raise interest rates is getting stronger, while Vice Chairman Stanley Fischer indicated an increase is possible in September”.
