CURRENCIES: Pound Below $1.70 As Rate-hike Timing Questioned

By Dow Jones Business News, 
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By Saumya Vaishampayan, MarketWatch

NEW YORK (MarketWatch) -- The dollar rose against the pound Tuesday after comments from the head of the Bank of England cast into question the timing of the first interest-rate hike in the U.K.

BOE Gov. Mark Carney highlighted the U.K.'s tepid wage growth in testimony to lawmakers, which indicates that there is still slack in the labor market. That could prompt the BOE to hold off on its first interest-rate hike, as it now looks at an array of labor-market indicators in deciding when to tighten monetary policy. Carney also said that once interest rates do begin to move, the change will be gradual.

Market participants were "left with the view that the BOE is going to raise interest rates and raise them before the Fed does, but that will be a 2015 event, not 2014 [event]," said Michael Woolfolk, global markets strategist at BNY Mellon.

The pound (GBPUSD) fell to $1.6987 from $1.7025 late Monday.

Carney's remarks contrasted with those in his annual Mansion House speech earlier this month, when he said interest- rate hikes could come sooner than the markets expect. Higher U.K. interest rates would make pound-denominated investments more attractive.

The dollar (USDJPY) traded in tight ranges against the yen, buying Yen101.93 versus Yen101.90 late Monday. Japan's Prime Minister Shinzo Abe on Tuesday introduced another round of economic reforms as part of his efforts to revitalize the Japanese economy.

The ICE dollar index (DXY), which pits the greenback against six rivals, was at 80.311 versus 80.270 late Monday. The WSJ Dollar Index , an alternate gauge of dollar strength, inched up to 73.04 from 72.98.

Data released Tuesday showed a 1.1% rise in U.S. home prices in April, according to S&P/Case-Shiller's 20-city composite index. New-home sales surged 19% in May, with the annual rate hitting a six-year high. Consumer confidence in May rose to the highest level since January 2008, the Conference Board reported.

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This article appears in: US Markets , Forex and Currencies , Economy

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