Dollar halts slide on Fed rate hike talk
THE dollar halted its slide in Asia trade yesterday after a senior US central banker said overnight that an interest rate raise could come as early as next month.
William Dudley, the influential head of the Federal Reserve’s New York branch, unexpectedly hinted that a rate hike was possible as early as September.
Analysts said the comments from Mr Dudley – who remarked that Wall Street investors were too “complacent” about the prospect of higher borrowing costs over the next year–halted the US unit's fall in Asia.
The greenback had briefly dived under the 100 level against the safehaven Japanese currency in New York for only the second time this year, touching as low as 99.54 at one stage.
“While Dudley was at least able to stem the bleeding for the dollar index, price action is not encouraging for the dollar near-term,” Sean Callow, a Sydney-based senior foreign-exchange strategist at Westpac Banking Corp, told Bloomberg News.
“Still, so long as a rate hike seems more likely than not as the Fed’s next move, we wouldn’t get super bearish on the dollar.”
In Tokyo, the greenback climbed to 100.57 yen from 100.30 yen in New York as a Japanese official hinted at a possible bid to weaken the yen.
Japan’s top currency official, Masatsugu Asakawa, said yesterday that Tokyo could respond to the “excessive moves” in forex markets.
However, analysts said the bid to talk down Japan’s currency might be wearing thin, while a market intervention threatens to put Japan on a collision course with its G7 counterparts, which have pledged not to interfere with exchange rates.
“Asakawa is once again dishing out the well-worn Japanese policymakers verbal intervention, ‘moves are rough’, rhetoric,” Stephen Innes, senior trader at forex firm OANDA, said in a commentary. –