US Dollar rises as Fed speakers increase bets on September rate hike
New York (Sept 9) The dollar rose on Friday as remarks by Federal Reserve policymakers helped boost investor expectations of a near-term increase in U.S. interest rates.
Boston Fed President Eric Rosengren said in a speech onFriday that gradual interest rate increases might be in orderwith the U.S. economy at full employment and that low interestrates were increasing the chance of an overheated economy.
"Those hawkish comments from Rosengren helped the dollar;also in general the probability of a September hike has gone upa bit," Vassili Serebriakov, FX strategist at Credit Agricole inNew York, said in a telephone interview.
Rosengren's comments followed the announcement late onThursday that U.S. Fed Governor Lael Brainard would give aspeech on Monday.
Brainard is considered one of the Fed's more dovish members,meaning she is more inclined to leave rates lower in order tostrengthen employment. The announcement of her speech likelymeans she will deliver the message that the Fed is close toraising rates, analysts said, suggesting there may be consensuson the rate-setting Federal Open Market Committee (FOMC) to doso. Brainard and Rosengren are both voting members on the FOMC,which sets the target for U.S. short-term rates.
Fed funds futures prices showed traders had modestly raisedtheir bets on a rate increase at the next FOMC policy meeting onSept. 20-21.
The dollar was also bolstered by rising U.S. Treasury debtyields, Serebriakov said.
Benchmark U.S. 10-year notes touched theirhighest level in more than two months on Friday. Higher Treasuryyields boost U.S. interest rates, which makes the dollar moreattractive for investors to hold. The dollar index , which tracks the U.S. currencyagainst a basket of six currencies, rose 0.4 percent to 95.438,nearing its highest levels on Tuesday before a weak U.S. servicesector report knocked the dollar 1 percent lower.
The euro fell 0.4 percent against the dollar to$1.1214.
The dollar rose 0.2 percent against the yen , alsohelped by reports that the Bank of Japan was studying options tosteepen its bond yield curve.
Source: Reuters
