Eoin Treacy's view -
The dollar climbed for a third day versus the euro before the release of minutes of the Federal Reserve’s latest policy meeting that may provide clues on the path of U.S. interest rates.
The greenback reached its strongest level since July versus Europe’s shared currency as traders awaited the record of the Federal Open Market Committee’s September meeting for signs that Chair Janet Yellen will raise borrowing costs soon. The odds of a rate increase by year-end have climbed to 68 percent, from 60 percent a month ago, amid speculation a recent surge in oil prices will fuel inflation. A gauge of the dollar held near a two-and-a-half month high.
“The dollar has already received support over the recent days on comments” from Fed officials, and “the market now wants to look if the minutes are in the same direction,” said Georgette Boele, a currency and commodity strategist at ABN Amro Bank NV in Amsterdam. “If the minutes confirm it, the dollar could get a bit more support.”
The dollar appreciated 0.3 percent to $1.1025 per euro as of 7:22 a.m. New York time, having touched $1.1010, the strongest since July 27. Bloomberg’s Dollar Spot Index, which tracks the currency against 10 major peers, was little changed, after rising Tuesday to the highest level since July.
The Fed is flirting with raising interest rates again, having already done so once. While absolute levels are still very low that represents a sharp distinction from just about all other major central banks that are still in easing mode.
The experiment with negative interest rates in the EU and Japan has helped support their respective currencies. However there is increasing acceptance that it is counterproductive to the aim of the achieving inflation and also represents an existential threat to their respective banking sectors.
This section continues in the Subscriber's Area. Back to top