The dollar advanced for a second day as two Federal Reserve officials indicated that the central bank may raise interest rates as soon as next month, bolstering the appeal of assets denominated in the U.S. currency.
The greenback climbed versus most of its major peers as Atlanta Fed President Dennis Lockhart and San Francisco Fed chief John Williams said recent economic data may justify additional policy tightening after raising rates in December for the first time in almost a decade. The dollar rose from near a nine-month low reached last week after the central bank refrained from lifting borrowing costs at its March meeting and lowered its projections for the rest of the year.
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 last week, futures contracts show. Officials seem to be dialing back some of their earlier dovish rhetoric, and reiterating comments from Chair Janet Yellen that a rate increase in April remains on the table.
“We’re the prettiest of the ugly out there from an interest-rate and central-banking standpoint, so that helps the dollar,” said Dave Floyd, head of foreign-exchange trading and research at Aspen Trading Group in Bend, Oregon. “Any little news is really the only thing people can go off of right now.”
The Bloomberg Dollar Spot Index, which tracks the currency versus 10 peers, gained 0.3 percent to 1,189.65 as of 5 p.m. in New York. The greenback added 0.3 percent to $1.1241 per euro and 0.4 percent to 111.95 yen.
A JPMorgan Chase & Co. measure of global foreign-exchange volatility fell to 10.29 percent, the lowest since Jan. 14.
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Economic reports are showing “sufficient momentum” to justify another increase, possibly as early as April, Lockhart said Monday in Savannah, Georgia. Williams opined that April or June would be potential times to rise rates if data continues to come in “the way I hope and expect.”
Richmond Fed President Jeffrey Lacker, who dissented in September and October in favor of an earlier liftoff of interest rates from zero, warned that inflation — which has lagged behind the Fed’s 2 percent target — could “move significantly higher” when oil prices bottom out.
The Bloomberg Dollar Spot Index has weakened 3.5 percent this year, paring a 9 percent gain in 2015 and an 11 percent rally the year before.
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