FOREX-Dollar hits 3-week high on Fed comments, sterling slips


Reuters

* Dollar index hits highest since late May
    * Sterling slides after BoE's Carney's rates signal
    * Fed's Dudley says wages, inflation should pick up
    * Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

    By Jemima KellyPARIS, June 20 (Reuters) - The dollar hit a three-week high
on Tuesday, boosted by comments from the U.S. Federal Reserve
bolstering expectations that it would keep raising interest
rates, as sterling skidded on the opposite message from the Bank
of England.
    The British pound fell almost a cent against its U.S.
counterpart after BoE Governor Mark Carney said now was not the
time to raise UK interest rates. Last week three BoE
policymakers had voted in favour of a hike. [nL9N1A02E][GBP/]
    But Carney warned of weak wage growth and a likely hit to
incomes as Britain prepares to leave the European Union, sending
sterling to a one-week low of $1.2661 <GBP=D3>.
    Conversely, New York Fed President William Dudley said on
Monday that tightening in the U.S. labour market should help
drive up inflation, reinforcing the message that a recent patch
of weak data is unlikely to derail plans to keep raising
interest rates, after two hikes so far this year. [nL1N1JG0CX]
    The dollar index - which measures the greenback against six
other major currencies, including sterling - climbed to 97.648
<.DXY>, its highest since the end of May.
    "Although Dudley displayed optimism over the health of the
US economy, I feel the macro-fundamentals from the States need
to display ongoing signs of stability before investors adopt a
similar school of thought," said FXTM analyst Lukman Otunuga, in
Cyprus.
    Separately, Chicago Fed President Charles Evans said on
Monday it may be worthwhile for the U.S. central bank to wait
until year-end to decide whether to raise interest rates again,
but this appeared to have little negative effect on the dollar.
[nL1N1JG1ZH]
    "Bill Dudley commonly represents the majority view on the
FOMC (Federal Open Market Committee) - this is the main reason
why the dollar is appreciating," said Commerzbank strategist Thu
Lan Nguyen, in Frankfurt. "Evans was more dovish but he's known
to be dovish."
    Investors are now pricing in around a 50 percent chance that
rates will be raised again by the end of the year, according to
CME FedWatch.
    Against the yen, the dollar rose to as high as 111.90
<JPY=>, its strongest level since May 26. That marked a gain of
almost 3 percent from the dollar's near 2-month low of 108.81
yen set on June 14.
    The greenback has edged higher since the Fed on June 14
raised interest rates for a second time in 2017 and announced it
would begin cutting its holdings of bonds and other securities
later this year, while indicating that a recent softening in
inflation was seen as transitory.
    The dollar may see further gains against the yen, especially
after Bank of Japan Governor Haruhiko Kuroda last week indicated
the BOJ would be in no hurry to dial back its massive stimulus
programme, said Tan Teck Leng, forex analyst for UBS Wealth
Management in Singapore.
    The euro was flat at $1.1144 <EUR=>, close to a three-week
low.

    For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

 (Additional reporting by Masayuki Kitano in Singapore; Editing
by Andrew Heavens and Hugh Lawson)

Keywords: GLOBAL FOREX/ (UPDATE 3)



This article appears in: Politics , Stocks , World Markets , Economy


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