The dollar rose to its highest level in one week against the yen just before the Federal Reserve signals a key policy decision at a time when speculation is high that it will hike interest rates soon.
The dollar rose 0.1 percent to trade at 102.24 yen by 10:49 a.m. in London after earlier rising to 102.31, its highest level since June 11. The greenback remained slightly unchanged at $1.3559 a euro after surging 0.2 percent on Tuesday. The yen fell 0.2 percent to trade at 138.63 per euro.
“For the Fed, there is some expectation that they could be slightly more hawkish, though of course nothing as dramatic as Carney,” Alvin Tan, a London-based foreign-exchange strategist at Societe Generale SA, spoke to Bloomberg News. “If the Fed turns a little bit more hawkish today, that will help the dollar.”
The Bloomberg Dollar Spot Index, which monitors the dollar against 10 main peers, stood firm today at 1,014.29, down from 1,014.57 on Tuesday, its strongest level since June 10. This followed a report released yesterday that showed that U.S. inflation surged in May. The dollar is expected to accelerate against its peers by the end of this year as interest rate increase nears and the bond-buying program is phased out.
U.S. consumer prices advanced 2.1 percent in the year through May, reported the Labor Department on Tuesday.
The Federal Reserve has cut its monthly asset purchases, whilst retaining the overnight lending rate between banks at 0 percent to 0.25 percent, a range it has stayed within since December 2008. Fed’s policymakers revealed after their April 29-30 meeting that cash rates will remain low for some time. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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