Dollar Gets Support After Fed Officials See 2015 Rate Increase

  • Greenback set to post quarterly gain against most major peers
  • Stocks likely to influence direction of dollar, yen: Mizuho

The dollar held a two-day advance after two Federal Reserve officials said they expect the central bank to raise interest rates this year.

The greenback maintained gains against most of its major counterparts Monday after New York Fed President William C. Dudley said such a policy move would probably be followed by gradual tightening. He echoed the sentiment of Chair Janet Yellen that an uncertain global outlook won’t postpone liftoff into 2016. San Francisco Fed President John Williams also repeated Monday that he expects rates to climb this year and warned of rapidly rising house prices.

The dollar and U.S. yields rose as “Dudley said the Fed will ‘probably’ raise rates this year,” Sean Callow, a foreign-exchange strategist in Sydney at Westpac Banking Corp., wrote in a note Tuesday. “But the response was lost amid a broad deterioration in risk appetite.”

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed at 1,214.38 as of 9:32 a.m. in Tokyo. The greenback
was at 119.66 yen from 119.92, and almost unchanged at $1.1248 per euro.

Fed Timing

“The economy is doing pretty well,” Dudley said at an event hosted by the Wall Street Journal in New York. “My expectation is that we probably will raise interest rates later this year.”

Williams said that October remains an option for the first rate increase.

Yellen said on Sept. 24 she felt it likely the Fed would raise rates this year for the first time in almost a decade. The policy-setting Federal Open Market Committee decided Sept. 17 to hold rates near zero, citing worries over the slowdown in China that could damp U.S. growth and inflation.

Keisuke Hino, a foreign-exchange trader at Mizuho Bank Ltd. in New York, said that investors may repatriate funds as the quarter ends.

“Seasonal flows may support buying of home currencies,” he said. “Also, dollar and yen are likely to be swayed by stocks which react to data or other news in addition to seasonal flows.”

U.S. stocks tumbled Monday toward the worst levels of last month’s selloff, with the Standard & Poor’s 500 Index closing at a one-month low, as global equities slid amid a rout in commodity and biotechnology shares.

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