Dollar Rises to High, Jolted by N. Korea Talk, Fed SpeculationBy and
John Taylor said to impress Trump in interview for Fed chair
Euro outlook remains clouded as Catalonia deadline extended
The dollar extended gains late Monday after economist John Taylor was said to make a favorable impression on President Trump during an interview for the position of Federal Reserve chairman.
The Bloomberg Dollar Spot Index rose 0.3 percent as people familiar said Taylor impressed Trump, while the prospects of former Fed Governor Kevin Warsh faded. Trump was said to plan an interview with current Chair Janet Yellen on Thursday. Discussion of the next Fed chair gave fresh momentum to the dollar, pushing the currency up versus almost all G-10 peers, whereas it had seen mixed trading earlier in the session.
- Taylor, a Stanford University economist who has served on the Council of Economic Advisers under three presidents, is known for advocating a rules-based approach to monetary policy and is viewed by markets as more hawkish than the Fed’s current leadership
- USD also gained on an Interfax report that U.S. and North Korean diplomats might meet in Moscow this week, potentially signaling an easing of geopolitical tensions; that move briefly retraced as CNN reported that North Korea was said to reject diplomacy with the U.S. for now
- Earlier trading flows were modest as investors weighed the impact of aggressive demands by the U.S. in Nafta talks, a development that weighed on the Canadian dollar and Mexican peso
- USD/JPY was trading around 112.17 vs a new high of 112.29 reached after the North Korea reports; the pair had been orbiting 111.75 and the 200-DMA at 111.79 amid muted trading before popping. USD/JPY might see resistance at Friday’s high of 112.31
- EUR/USD is trading at ~1.1792, not far from an overnight low of 1.1781. The pair dropped on the reports about the Fed chair interviews, in line with USD strength and an advance in UST yields
- Spain’s PM Rajoy issued another deadline to Catalan President Carles Puigdemont, who now must clarify by Thursday whether the region has declared independence. Uncertainty over the situation has overshadowed EUR and is a deterrent to EUR bullish sentiment, a trader in London said
- EUR is likely to find bids under 1.1750 and ahead of 1.1700 if the pair should drift toward recent range lows, according to traders in Europe. Technical support may be at the Oct. 10 low 1.1739 ahead of the early October low at 1.1670
- Yellen on Sunday outlined solid growth, a strong labor market and a healthy global economy and said the U.S. central bank expects to continue to raise interest rates gradually. “Yellen was pretty hawkish,” Steven Englander, head of research and strategy at Rafiki Capital, wrote in a note. The takeaway from Sunday’s comments is that “she is determined to hike”
- Earlier Monday, the New York Fed Empire Manufacturing index for October added to the string of slightly more positive U.S. data, coming in at 30.2, its highest level since 2014
— With assistance by Lananh Nguyen