Dollar on track for winning week as Fed hike view back in focus
TOKYO/SYDNEY – The dollar edged away from two-month highs against a basket of major currencies on Friday but was still on track for a solid weekly gain as the market shifted its focus to an eventual hike in U.S. interest rates.
The dollar index was up about 1.5 percent in a week in which Federal Reserve Chair Janet Yellen reiterated that the U.S. central bank would likely lift interest rates later in the year.
The dollar index stood at 97.496, down about 0.2 percent after having risen as far as 97.756 in the previous session. A break above 97.775 would take the index back to highs last seen in April.
The greenback was down about 0.1 percent on the day against the yen after touching a one-month peak of 124.235 yen, still on track to gain more than 1 percent for the week.
U.S. economic data was mixed on Thursday. The number of Americans filing new applications for unemployment benefits fell more than expected last week, but factory activity in the U.S. mid-Atlantic region grew at a slower pace than anticipated.
June U.S. inflation data is due later in the day.
Yellen repeated on Thursday that the Fed’s decision on when to hike rates will remain data-dependent, but some market participants are already looking past the well-signalled rate hike that could come as early as September.
“We’ve been expecting this hike for so long that by the time they do it, there’s really a huge risk that this is going to be a classic ‘buy the rumour, sell the fact’ type of result,” said Bart Wakabayashi, head of foreign exchange for State Street Global Markets in Tokyo.
The euro added about 0.2 percent to $1.0897, not far off a 7-1/2 week low of $1.0855 set overnight but still down more than 2 percent in a week marred by fears that Greece was on the brink of a financial crisis that would take it out of the euro zone.
Concerns about Greece’s exit from the common currency eased after European creditors moved cautiously towards reopening funding to Greece’s stricken economy on Thursday.
Bank of England Governor Mark Carney also drew the market focus back onto global interest rates just as worries about Greece were fading.
On Thursday, Carney said the decision to lift British interest rates from record lows will come into sharper focus around the end of this year. Earlier in the week, he said the time for a hike was moving closer.
Sterling raced to a 7-1/2 year high on the euro, which skidded to 69.58 pence on Thursday and was last up about 0.1 percent at 69.68 pence. Against the dollar, the pound stood at $1.5625, up about 0.2 percent on the day and moving back toward a two-week peak of $1.5676 scaled on Wednesday. – Reuters