Federal Reserve chair Janet Yellen said she expects interest rates to rise in “the coming months” if the USA economy continued to improve.
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The US Federal Reserve on Thursday continued to lay the groundwork for an interest rate increase in the next two months, with a senior policymaker saying the economy will likely be ready for such a move “fairly soon”.
The yen weakened to a one-month low and expectations rose that the government would delay a sales tax rise scheduled for April next year.
US stock markets will be closed Monday for the Memorial Day holiday.
Gold prices tapped levels not seen three months on Monday, moving in the opposite direction of the US dollar, which soared after comments by Federal Reserve Chairwoman Janet Yellen last week indicated an interest-rate hike was near.
Though the comments weren’t unusual given what some other Federal Reserve officials have recently stated, many market observers thought she would wait until a speech in early June in Philadelphia before signaling where rates would be headed.
Many analysts were expecting her to hint at a June meeting, but her statement about coming months has led some economists to suggest a rate hike may wait until July or later.
“This was exactly the type of endorsement that the market had been hoping for and they rewarded the dollar as a result”, wrote Kathy Lien, managing director of FX strategy at BK Asset Management. The dollar index, which measures the greenback against a basket of six major peers, rose 0.3 percent on Tuesday to 95.802, close to the previous day’s two-month high of 95.968 and putting the dollar on track for its best month since November.
In the Asian trading, the USA dollar rose to a 2-1/2-month high of 1.1098 against the euro, almost a 3-month high of 0.9951 against the Swiss franc and more than 1-month high of 111.15 against the yen, from last week’s closing quotes of 1.1109, 0.9938 and 110.19, respectively.
His comments followed revised data on Friday that showed first quarter growth in the USA was not as weak as initially expected.
The U.S. economy expanded at a slightly faster pace in the first quarter than initially estimated, Commerce Department data showed Friday. The euro hit a session high of $1.1173, up from a more than 10-week low of $1.1096 hit on Monday.
Banks stand to benefit from that increase so long as they hold off passing that higher interest off to borrowers.
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The euro rose to the lower 123 yen zone in the morning on the yen’s broad weakness, while it changed little against the dollar at around $1.11.
