FOREX-Dollar hits three-week high on Fed rate hike bets


* Dollar/yen hits highest in more than 3 weeks
    * Fed's Dudley says wages, inflation should pick up
    * Dollar index touches highest since May 30
    * Graphic: World FX rates in 2017

    By Jemima KellyPARIS, June 20 (Reuters) - The dollar hit a three-week high
against a basket of currencies on Tuesday, after an influential
Federal Reserve official said U.S. inflation would pick up as
wages improved, bolstering bets on the Fed continuing to raise
interest rates.
    The greenback got a further lift on Tuesday when Bank of
England Governor Mark Carney said now was not the time to raise
British interest rates, sending sterling down more than half a
percent against the U.S. currency <GBP=D3>. [nL9N1A02E][GBP/]
    The dollar index - which measures the greenback against six
other major currencies, including sterling - edged up to 97.623
<.DXY>, its highest since the end of May.
    New York Fed President William Dudley said on Monday that
tightening in the 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.
    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.
    "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."
    "These comments from Bill Dudley have brought the market a
little bit close to the Fed's view, but just a little bit,"
added Nguyen, calling the market's general view on the Fed's
rate path "pessimistic" compared with the central bank's own
    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 last stood at 111.67 yen, up 0.1 percent on
the day.
    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.
    "Short-term, maybe the dollar/yen could be the one that's
more interesting," Tan said. However, any weakness in U.S.
inflation data going forward would pose a risk for dollar bulls,
he added.

    For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=

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


This article appears in: Stocks , World Markets , Economy , 401k , Retirement , Bonds

More from Reuters


See Reuters News

Follow on:

Research Brokers before you trade

Want to trade FX?