NEW YORK: Rising oil prices push U.S. dollar stronger, New Zealand dollar weakens ahead of central bank decision
The Bloomberg Dollar Index rose on Tuesday as oil prices climbed after a new wave of attacks on ships in the Strait of Hormuz, geopolitical risks resurfaced and demand for safe havens increased. The Japanese yen was steady, while the New Zealand dollar weakened ahead of its central bank interest rate decision. The Bloomberg Dollar Index rose 0.2% after suffering three consecutive losses. Attacks on three ships in the Strait of Hormuz have heightened shipping industry concerns about the waterway's security and tested an agreement between the United States and Iran aimed at halting attacks. The New York Fed's Consumer Expectations Survey showed that in June, consumers' expectations for the inflation rate in the next year rose to 3.67%, up from 3.46% the previous month. Foreign exchange strategist Alex Cohen said rising inflation expectations and higher oil prices are supporting the dollar. CIBC Capital Markets strategist Noah Buffam said that the "risk-off" sentiment brought about by "a slight escalation of tensions in the Middle East" is boosting the dollar. "We expect dollar volatility to remain muted ahead of the July FOMC meeting and non-farm payrolls data as there appear to be few major events in the coming weeks," he said. USD/JPY fell less than 0.1% to 162.06, having previously fallen 0.3%; Japan's Economic Growth Strategy Minister Minoru Jouchi said that media reports that the government was trying to guide interest rates lower were completely untrue, and the yen strengthened accordingly. Data showed that wages in Japan rose again in May, with the increase far exceeding inflation, strengthening the Bank of Japan's stance on raising interest rates, which also provided support for the yen. NZD/USD fell 0.4% to trade at 0.5681, falling for a second day in a row. Surveys show that most economists expect the New Zealand Bank of England to raise interest rates by 25 basis points; for Wednesday's meeting, market pricing reflects an interest rate hike of about 18 basis points. "We expect the RBNZ to hike interest rates by 25 basis points to 2.50%, which could trigger a reflexive rally in the New Zealand dollar," wrote Elias Haddad, head of global market strategy at Brown Brothers Harriman. USD/CAD fell less than 0.1% to trade at 1.4199. Canada's trade surplus widened to its largest in four years as the country's energy, metals and mining sectors helped ease a global supply gap caused by disturbances in the Strait of Hormuz. EUR/USD fell 0.2% to 1.1415. French far-right leader Marine Le Pen plans to run for president for a fourth time despite a country's appeals court upholding her conviction for misuse of public funds and ordering her to wear an electronic monitoring device.