The dollar index closed at 95.58, reversing an earlier gain of 0.3%. The data showed the British economy grew 0.6 percent in the second quarter and was up by 2.2 percent on year, in line with preliminary readings and forecasts.
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In a much-anticipated speech Friday Yellen said a pick-up in the world’s top economy and an improvement in the jobs market meant “the case for an increase in the federal funds rate has strengthened in recent months”.
Though the chances of it happening in next month’s policy meeting are still low, an end-of-the-year hike seems likely. For December, the odds rose to more than 60 percent, from 57 percent Friday morning.
The U.S. dollar added to its gains Monday after U.S. Federal Reserve boss Janet Yellen suggested an interest rate hike this year was still on the table.
Recently, Fed Vice Chair Stanley Fisher, New York Fed President William Dudley, San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart indicated that the central bank may consider raising key interest rate in the coming months.
But a sell-off in U.S. Treasuries as investors interpreted the comments from Yellen and other Fed officials as hawkish dealt a blow to European bond markets as a new week began.
The dollar received strong support from the improved expectation of a hike this year.
THE QUOTE: “The dollar jumped after Federal Reserve’s chairperson, Janet Yellen, signaled impending rate hike in a speech at Jackson Hole last Friday”, says Margaret Yang Yan, market analyst at CMC Markets Singapore.
In Tokyo, the US currency extended gains against the yen, also supported by a sharp stock market rally, traders said. Platinum was 0.7% lower at $1,062.99, while palladium was down 1.4% at $686.
The US stock market has recorded a boost following several years of low interest rates, but the now strong likelihood of a hike is making market players uncomfortable, since it is bound to increase the cost of debt for companies.
West Texas Intermediate slid 1.7 percent to 46.85 and Brent shed 1.4 percent to 49.21. USA shares were also set to drift lower, with Dow futures shedding almost 0.1 percent to 18,367.
Shortly after United Kingdom market close, gold was down us$6 to US$1,317, silver was down 21c to US$18.62, while platinum was also down US$19 to trade at US$1,055.
Selling pressures faded in the afternoon as the USA dollar came off its daily highs to trade flat against a basket of world currencies.
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But as risk assets turned lower, haven investments, like USA government bonds, got a boost, pushing prices higher and yields lower.
