TOKYO: The dollar’s rally against the euro and yen hit a wall Monday, but it rose against other Asia-Pacific currencies on renewed speculation that the Federal Reserve will hike interest rates this month.
Greenback demand picked up Friday after Boston Fed President Eric Rosengren said higher rates were needed to prevent the economy from overheating, while normally dovish Governor Daniel Tarullo also signalled his openness to a 2016 rate hike.
“Rosengren’s comments were nothing new compared to remarks he’d made last month, but the fact they were repeated after the intervening US data run marked them out as significant,” National Australia Bank said in a commentary.
Their remarks came a day after the head of the European Central Bank played down the chances of fresh stimulus, while Japanese officials have kept markets guessing on the chances of new measures.
A string of weak readings for the world’s top economy — including service sectors activity and jobs growth — had put off expectations of any tightening until December at the earliest.
On Monday in Tokyo, the dollar was changing hands at 102.54 yen, slightly down from 102.69 yen in New York late Friday but still up from 102.09 yen in Asia Friday before the Fed officials’ comments.
The euro rose to $1.1242 against $1.1232 in New York, while it eased to 115.28 yen from 115.35 yen.
The dollar rallied 1.12 percent against the South Korean won, 0.9 percent on the Malaysian ringgit and 0.6 percent versus the Indonesian rupiah.
Investors are now waiting for a speech later Monday by Lael Brainard, a dovish member of the Fed board, with speculation swirling that she will give yet another signal for a rate hike.
“Traders have convinced themselves the Feds are marching out Lael Brainard, a mega-dove, to bang the Fed’s September rate hike drum,” said Stephen Innes, senior trader forex firm OANDA.
