TOKYO: The dollar held its ground Wednesday as traders bet on a US rate hike while poor Japanese factory output pressured the yen.
Investors have been piling into the greenback since Fed boss Janet Yellen hinted last week that the world’s top economy may be strong enough to withstand higher borrowing costs.
She did not supply a timeframe, but Yellen’s remarks boosted speculation a move could come before year’s end.
The case for a rate hike — a plus for the dollar — won more support Tuesday as US consumer confidence in August sat at its highest level in almost a year.
On Tuesday the Fed’s vice chairman Stanley Fischer told Bloomberg TV that any movement in rates was dependent on data, adding that “employment is very close to full employment”.
Investors’ focus is now on Friday’s jobs creation report, which could be pivotal in the Fed’s decision-making ahead of next month’s policy meeting, although there are some reservations about whether a move will be made then.
“The Fed’s more upbeat mood and a summer of record highs on Wall Street have boosted the US dollar’s yield appeal,” Sean Callow, a senior currency strategist at Westpac Banking, told Bloomberg News.
“Payrolls is certainly very important, though there are strong indications that seasonal factors will ensure the headline reading will not provide the Fed with the slam dunk it needs for a September hike.”
