Dollar Soars in July on Speculation Fed May Increase Interest Rates Soon

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Dollar Soars in July on Speculation Fed May Increase Interest Rates SoonThe dollar appeared set to record its strongest monthly advance against the euro since February 2013 as the buoyant U.S. economy fuelled speculation the Federal Reserve may hike interest rates soon.

The US currency remained slightly unchanged at $1.3394 per euro as of 10:31 a.m. London time, up 2.2 percent in July. It rallied to $1.3367 on Wednesday, the most since November 12. The dollar stood at 102.81 yen compared with 102.79 yesterday, having advanced over the past nine trading sessions. The euro held steady at 137.66 yen.

“The dollar is at the beginning of an uptrend versus the euro and the yen,” Alvin Tan, a London-based foreign-exchange strategist at Societe Generale SA told Bloomberg. “The market is getting increasingly hawkish about U.S. rates. Short-term forward expectations of Fed policy have been moving forward quite steadily.”

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Strong economic data such as GDP growth figures and a rise in durable goods orders have fuelled the dollar’s rally; along with speculation that Friday’s data will indicate that U.S. employers absorbed at least 200,000 new workers for the sixth straight month. Analysts in a Bloomberg survey project that 231,000 employees were hired in July, with the unemployment rate still near 6.1 percent, the lowest level in six years.

The Commerce Department reported on Wednesday that the U.S. economy expanded by 4 percent in the April-June quarter, after declining by 2.1 percent in the first quarter.

Meanwhile, the Australia’s dollar plunged to its lowest level in eight weeks after the Bureau of Statistics announced that building approvals were less than expected. The Aussie plunged 0.4 percent to trade at 92.95 US cents and fell as much as 92.88 cents, the lowest mark since June 5, after building approvals declined 5 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com