Dollar rises close to 6-year high amid surge of U.S. optimism

Tokyo (Sept 9)  The U.S. dollar firmed in the lower  106 yen  zone in  Tokyo  on Tuesday, maintaining momentum from its surge in  New York  overnight, to hit a nearly six-year high of  106.39 yen  on growing expectations that the U.S. Federal Reserve is on track for an early interest rate hike.

At  5 p.m.  , the dollar fetched  106.31-32 yen  compared with  105.98-106.08 yen  in  New York  and  105.12-13 yen  in  Tokyo  at  5 p.m. Monday  . It moved between  105.95 yen  and  106.39 yen  during the day, changing hands most frequently at  106.06 yen  .

The euro was quoted at  $1.2876-2877  and  136.89-93 yen  against  $1.2890-2900  and  136.68-78 yen  in  New York  and  $1.2942-2943  and  136.05-09 yen  in  Tokyo  late Monday afternoon.

The dollar, which breached the  106 yen  line in  New York  overnight for the first time since early  October 2008  , firmed further in  Tokyo  on sentiment that the Fed will hike rates sooner than expected in line with U.S. economic recovery and the Japan-U.S. interest rate gap will widen.

Market participants digesting August U.S. jobs data released last Friday have largely concluded the slowdown in new job creation will not alter the Fed's course, said Yasuaki Amatatsu, market analyst at the  Bank of Tokyo-Mitsubishi UFJ  .

"We know Fed members are looking at certain indicators of the U.S. labor market, such as the numbers of long-term unemployed, and these parts of the jobs report were upbeat and lead us to expect hawkish comments following next week's (Federal Open Market Committee) meeting," Amatatsu said.

Factors for the dollar's latest spurt included a report from the San Francisco Fed overnight, said  Yuji Saito  , executive director of foreign exchange at  Credit Agricole Corporate & Investment Bank  in  Tokyo  . The report said that investors seem to be pricing in a lower trajectory of interest rates than the Fed itself, which was taken by some market players as indicating the possibility of an earlier rate hike.

U.S. Treasury Secretary  Jack Lew's  speech overnight calling for legislation to prevent U.S. companies from moving overseas in search of lower taxes further underpinned the dollar, as "Lew effectively said authorities won't let money escape from the country and therefore into other currencies," Saito said.

"The week is light on U.S. data so we could see the pace of the dollar's climb slow, but strong (August U.S.) retail sales data out on Friday would likely give traders the green light to send the dollar up more, and it definitely has more room to grow amid the current mood," he added.

The euro fell further against the dollar in the wake of the  European Central Bank's  interest rate cuts last Thursday, at one point hitting a 14-month low of  $1.2867  , amid the U.S. currency's relative strength against a basket of currencies.

There was an echo effect on the euro-dollar pair from the weakening of the British pound, as  Scotland  looked more likely to vote for independence in an upcoming referendum, Saito said.

Source:  KyodoNews