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Dollar approaches 8-month high versus Yen on Fed rate hike bets

The greenback gained against all of its Group-of-10 peers

Gulf News

tokyo: The dollar approached an eight-month high against the yen after government reports Wednesday showed US economic growth remains intact, supporting the case for an increase in interest rates.

The greenback gained against all of its Group-of-10 peers as the odds that the Federal Reserve will tighten at its December meeting rose to 100 per cent, with additional moves by June climbing to 66 per cent from 58 per cent at the start of this week. Orders for business equipment increased in October for the fourth month in the last five, while sales also advanced, helping to extend the greenback’s gains since the Nov. 8 election.

“The dollar is underpinned by rising US yields and solid economic data,” said Takuya Kanda, a senior researcher at Research Institute Ltd. “The dollar has been driven mostly by short-covering in an abnormal market with the outcome of Donald Trump becoming elected, so there is scope for fresh dollar long positions to be built.”

The US currency rose 0.3 per cent to 112.82 yen as of 6:53am in London, after climbing to 112.97 on Wednesday, the strongest since March. It gained 0.1 per cent to $1.0539 per euro, after reaching a 2016 high of $1.0525. US markets are closed for the Thanksgiving Day holiday Thursday.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, rose for a third day, adding 0.1 per cent. It’s headed for the highest close in data compiled by Bloomberg starting in December 2004.

The dollar’s rally against the yen may pause in the short term after it rose above the 50 per cent retracement of its slide to this year’s low from last year’s high, Naoto Ono, an analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services, wrote in a note to clients. Still, any dip below 112 yen will likely spur strong buying, he said.

“The dollar’s rally is now driven by speculation over the quicker pace of rate hikes next year,” Ono wrote. “The focus is turning to whether there will be more than two increases as currently forecast for 2017.”