WSJl: Dollar Rises on Greater Hopes for Higher Interest Rates
The dollar rose Monday as investors grew more optimistic about the prospect of U.S. interest rates increasing this year.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.2% to 85.71. The dollar rose 0.2% against the Japanese yen to ÂĄ100.40.
Investors have been reluctant to bet on higher U.S. interest rates in recent weeks after disappointing economic growth and productivity reports. But upbeat comments from Federal Reserve officials over the past week have brightened the outlook for rate increases this year.
Fed Vice Chairman Stanley Fischer said on Sunday that inflation is within “hailing distance” of the bank’s 2% target and economic growth is expected to “pick up” in the coming quarters. The Fed has cited tepid inflation as a reason to stay cautious on interest-rate increases.
Mr. Fischer’s comments follow speeches last week from San Francisco Fed President John Williams and New York Fed President William Dudley that indicated that the central bank thinks the U.S. economy is strong.
Investors are now focused on Chairwoman Janet Yellen’s speech at the Jackson Hole Symposium in Wyoming, scheduled for Friday.
”My sense is that the Fed wants to get to a position where they can hike but not impact the U.S. dollar or broader markets generally,” said Brad Bechtel, a managing director at Jefferies. “We are getting close to that place.”
Expectations of higher interest rates tend to boost the dollar, as higher borrowing costs make the U.S. currency more attractive to yield-seeking investors. But a stronger dollar also puts pressure on emerging markets, whose U.S.-dollar-denominated debts become more difficult to pay back, and U.S. exporters.
Federal-funds futures, a popular vehicle for traders to express views on the central bank’s policy outlook, showed that investors assigned a 50% likelihood of the Fed raising rates by December, according to CME Group data.
The dollar was higher against emerging-market currencies as commodity prices fell. The dollar rose 0.8% against the South African rand and 0.6% against the Mexican peso.
