US Dollar gains as rate hike still viewed as likely
New York (Sept 2) The U.S. dollar gained onFriday, erasing earlier losses, as investors viewed the FederalReserve as still likely to raise interest rates in the comingmonths, despite disappointing jobs growth in August.
Nonfarm payrolls rose by 151,000 jobs last month, the LaborDepartment said on Friday, below the 180,000 jobs thateconomists had expected. "The jobs data is not weak enough to get people to give upon their Fed view," said Marc Chandler, global head of currencystrategy at Brown Brothers Harriman in New York.
Hawkish statements from Fed Chair Janet Yellen and ViceChair Stanley Fischer last week increased expectations beforethe jobs data that the U.S. central bank is closer to raisingrates.
Some economists and investors believe a rate hike couldhappen when the Fed meets later this month, though most see theDecember meeting as the most likely time for a hike this year.
Goldman Sachs economists on Friday revised theirexpectations of a September rate hike upward to 55 percent,saying employment growth was above the pace Fed officialstypically consider sufficient to hold the unemployment ratesteady over time.
Traders see a 24 percent chance of a September hike,unchanged on the day, and a 57 percent chance of an increase byDecember, according to the CME Group's FedWatch tool.
Richmond Federal Reserve Bank President Jeffrey Lacker saidon Friday that the U.S. economy appears strong enough towarrant significantly higher interest rates. The dollar index , which measures the greenbackagainst a basket of six major currencies, rose 0.21 percent to95.667, after earlier falling to 95.189, the lowest level sincelast Friday.
The greenback also jumped 0.71 percent to 104.27 yen ,after earlier rising to 104.31 yen, the highest since July 29.
The European Central Bank meeting next week and Bank ofJapan meeting later in the month will also be watched for signsof further easing as they struggle to revive inflation andgrowth in the regions.
"The risk for this month is that the BOJ will underdeliverand the yen will strengthen in response," said Daragh Maher,head of FX strategy, U.S., at HSBC in New York. "But for now themood does seem to be to buy dollar/yen on dips."
Source: KitcoNews
