NEW YORK: Dollar strengthens as expectations for Fed rate hike this month rise
The Bloomberg Dollar Index rose on Monday, with swaps markets pricing in a roughly 50-50 chance of a Federal Reserve interest rate hike, after Fed Governor Christopher Waller said interest rates may need to be raised in the near term to curb inflation. After Waller's prepared speech was released, the Bloomberg Dollar Spot Index rose 0.3%, the largest intraday gain in a week. Waller said: "If the core inflation released this week is hot again, then the FOMC will need to consider tightening monetary policy in the near future." The swap market reflects about a 50% chance that the Federal Reserve will raise interest rates by 25 basis points at its July 28-29 meeting; U.S. Treasury bonds fell across the board, with the 10-year Treasury yield rising 5 basis points to 4.62%. Investors are awaiting U.S. inflation data for June due on Tuesday and testimony from Federal Reserve Chairman Kevin Warsh that day. U.S. President Donald Trump said the United States would reinstate a blockade of Iranian ships passing through the Strait of Hormuz and demand 20 percent compensation for all other cargo shipped through the waterway. Brent crude oil prices rose more than 9% to about $83 a barrel. USD/JPY extended gains after Waller's speech, rising 0.5% to an intraday high of 162.48 yen. USD/JPY rose after reports that Japan currently has no plans to overhaul the asset allocation of its government pension investment funds. Still, TD Securities strategists recommend going long the yen against the Australian dollar in the options market, as the Finance Ministry pressures the country's large pension funds to increase domestic investments. EUR/USD fell 0.3% to a low of $1.1383, with upward resistance at 1.1473, the July 2 high; GBP/USD fell 0.4% to 1.3357. USD/CAD was basically unchanged at 1.4149 before the Bank of Canada announced its interest rate decision on Wednesday, with the market generally expecting the Bank of Canada to keep interest rates unchanged. Open a futures account on Sina's cooperative platform, safe, fast and guaranteed