The dollar held three days of gains versus the euro and yen as a usually dovish Federal Reserve official signaled his expectation for more interest-rate increases than the market has priced.
The U.S. currency has climbed against eight of its Group-of-10 peers this week with Chicago Fed President Charles Evans on Tuesday joining the ranks of officials who are pushing back against traders pricing a single rate increase at the end of 2016 or later. Evans, one of the most dovish officials who will vote on policy next year, said projections, also referred to as the dot plot, for two rate hikes this year were “a pretty good setting” for him.
“Evans’s comments are taken hawkishly by the U.S. dollar,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. “If we continue to hear comments along those lines, then the market will see one reason to perhaps adjust its pricing for a hike from the end of this year, to something earlier.”
The dollar was little changed $1.1221 per euro as of 9 a.m. in Tokyo, after climbing 0.9 percent over the past three sessions. It bought 112.25 yen following a 0.9 percent, three-day gain.
Evans’s comments came a day after San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart said rates may rise as soon as the April 26-27 meeting. Policy makers last week left the benchmark unchanged and pared the median projection for 2016 increases to two from four, citing risks posed by weaker global growth and financial-market turmoil even as U.S. economic data improve.
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Traders put the chances of an April move at 10 percent on Tuesday, according to futures data compiled by Bloomberg. The odds of a single 25-basis-point move by December were at 76 percent, climbing from 68 percent at the end of last week. The calculation assumes the effective fed funds rate will average 0.625 percent after the Fed’s next increase.
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