Dollar extends on potential rate hike
THE dollar added to its gains yesterday after Federal Reserve boss Janet Yellen suggested an interest rate hike this year was still on the table.
In a speech on August 26 at the annual Jackson Hole symposium of central bankers, Ms Yellen said that the case for a US rate hike had “strengthened”, sharply boosting the greenback.
But she did not give a clear signal on the timing of a possible increase, leaving markets in limbo again over when the US central bank would move, analysts said.
Dealers are now awaiting non-farm payrolls data this week, with a strong reading expected to bolster the case that the world’s top economy could withstand a rise in borrowing costs, possibly this year.
“After a week of guessing, Yellen left little to the imagination when she stated that the case of a Fed rate hike had strengthened, but remained very much data dependent,” said Stephen Innes, senior trader at forex firm OANDA Asia Pacific.
“Given the proximity of the granddaddy of all Fed data, the non-farm payrolls, it is without question that this week’s print will take on more importance than usual.”
The dollar climbed to 102.16 yen in Tokyo yesterday from 101.77 yen in New York.
The US unit jumped 0.9 percent against the South Korean won and 0.7pc against Malaysia’s ringgit, while it also rose on the Taiwan and Singapore dollars, the Philippine peso, and the Indonesian rupiah.
Bank of Japan governor Haruhiko Kuroda told the Jackson Hole symposium that there was no doubt the central bank had “ample space” for taking additional easing measures.
The BoJ, which holds its next meeting in late September, has been under increasing pressure to unleash fresh measures to counter a downturn in the world’s number three economy.
“Despite this rhetoric, Kuroda will need to contend with the growing number of Bank of Japan officials who are gravely concerned at the underlying ineffectiveness of this massive policy spend,” said OANDA’s Mr Innes.
The central bank’s huge monetary easing policy is a cornerstone of Prime Minister Shinzo Abe’s bid to kickstart lacklustre growth.
But more than three years on, the policy blitz appears to have had little lasting impact with the economy stalling in the second quarter. –
‘This week’s print will take on more importance than usual.’ Stephen Innes OANDA Asia Pacific