Dollar near 1-week high; rate hike view back in focus

Reuters Singapore/Sydney | Updated on January 24, 2018 Published on June 24, 2015

The dollar hovered near its highest in over a week against a basket of major currencies on Wednesday as the market’s focus shifted from Greece to prospects for higher US interest rates.

The dollar index eased 0.1 per cent to 95.298. On Tuesday, it had climbed to 95.636, its highest level since June 12.

The dollar index still held on to the bulk of the gains made on Tuesday, when it climbed 1.2 per cent — its best daily performance since late May.

The euro edged up 0.2 per cent to $1.1184, regaining a bit of ground after sliding 1.5 per cent on Tuesday.

Divergent monetary policies

The market seems to be shifting its focus back to underlying factors such as the divergence in the monetary policy stances of the Fed and the European Central Bank, said Mitul Kotecha, head of Asia-Pacific FX strategy for Barclays in Singapore.

“Investors seem to be once again pushing Greece into the background, which I think...means the focus shifts back to fundamentals and hence we’re seeing this resumption of dollar strength,’’ he said.

Technical support

The euro has short-term technical support at around $1.1150, and then lower down at $1.1050, Kotecha added.

Against the yen, the euro edged up 0.2 per cent to 138.60 yen. The dollar held steady near 123.91 yen.

Positive US data

Reasonably positive US data and comments from the Federal Reserve Governor, Jerome Powell, who said he was prepared to raise interest rates twice this year, had helped bolster the greenback on Tuesday.

The moves seen on Tuesday appeared to be driven by positioning rather than fundamentals, said Greg Moore, senior currency strategist at RBC.

“At the margin, US data that was on balance slightly positive, and the Fed’s Powell revealing his forecast for two hikes this year may have supported price action, but EUR and USD were already on the move prior to those developments.’’

US data had on Tuesday showed new home sales increased to a more than seven-year high in May, while a gauge of US business investment spending plans rose.

Greece debt deal

There was no major development in talks between Greece and its creditors but investors remained hopeful that a deal will be reached soon. Greek shares rallied 6.1 per cent on Tuesday.

“Markets appear to have interpreted the prospect of a deal between Greece and its creditors as removing a source of uncertainty, which may allow the Fed to commence hiking interest rates in September,’’ analysts at ANZ wrote in a note to clients.

Greece’s Prime Minister Alexis Tsipras will meet the European Central Bank President, Mario Draghi, IMF head, Christine Lagarde, and the European Commission President, Jean-Claude Juncker, on Wednesday.

The meeting will take place in Brussels in the afternoon, before a 1700 GMT meeting of the euro group of finance ministers that will aim to end the logjam in debt negotiations.

Published on June 24, 2015

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