Dollar Gains Versus Yen as Officials Say Rates May Rise in April

The dollar climbed for a third day against the yen after two Federal Reserve officials suggested the central bank may raise interest rates as soon as next month.

A gauge of the greenback was poised for its longest winning streak in more than a month after San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart said recent economic data may justify additional policy tightening after the central bank raised rates in December. The U.S. currency rose from near a nine-month low reached last week after policy makers softened their outlook for the pace of interest-rate increases this year at their March meeting. Neither Williams nor Lockhart vote on the Federal Open Market Committee this year.

“The dollar declines we saw last week were justified in terms of the Fed’s communication, but maybe that communication was poor given what we’ve heard since from Fed officials,” said Ray Attrill, co-head of currency strategy at National Australia Bank Ltd. in Sydney. “The dollar can get some respite from here, though I’m not sure that the market is going to run far with this,” since more focus will be on any comments from Chair Janet Yellen, and voting members William Dudley and Stanley Fischer, he said.

Three-Day Gain

The greenback advanced 0.2 percent to 112.15 yen at 11:13 a.m. in Tokyo, adding to a 0.5 percent gain over the previous two days. The U.S. currency was little changed at $1.1239 per euro.

The Bloomberg Dollar Spot Index, which tracks the currency versus 10 peers, climbed 0.1 percent to 1,190.50, its third day of gains and the longest winning streak since Feb. 16.

The Fed’s post-meeting statement prompted traders to scale back expectations for a hike in April to 10 percent on Monday, down from a 27 probability seen a week earlier, futures contracts show. Macquarie Bank Ltd., one of the world’s top 10 currency forecasters, reversed last week its three-month forecast for the dollar after the Fed halved projections for how many times it would hike rates this year from four times in December, citing the potential impact from weaker global growth on the U.S. economy.

“The market is increasingly skeptical that the normalization process can continue at pace,” said Nizam Idris, head of foreign-Exchange and fixed-income strategy at Macquarie in Singapore. “Amid some Volatility , the dollar will be in a downward trend” in the next month, he said.

To contact the reporters on this story: Netty Ismail in Singapore at nismail3@bloomberg.net, Candice Zachariahs in Sydney at czachariahs2@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net, Naoto Hosoda, Tomoko Yamazaki

By: Netty Ismail and Candice Zachariahs

©2016 Bloomberg News