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Dollar rises vs yen; U.S. economic data, Fed officials’ comments supportive
Global Banking & Finance Review®
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By Caroline Valetkevitch
NEW YORK (Reuters) – The U.S. dollar was up against the yen on Wednesday after data showed a surprise pickup in the U.S. services industry in July, while hawkish comments from Federal Reserve officials this week also supported the greenback.
The Institute for Supply Management said its non-manufacturing PMI rebounded last month from June. The increase ended three straight monthly declines. It also showed supply bottlenecks and price pressures eased, and backed up the view that the economy is not in a recession.
Fed officials voiced their determination again on Wednesday to rein in high inflation, although one noted a half-percentage-point hike in the U.S. central bank’s key interest rate next month might be enough to march toward that goal.
The greenback rallied on Tuesday after a trio of Fed officials signaled that the central bank remains “completely united” on increasing rates to a level that will put a dent in the highest U.S. inflation since the 1980s.
“The Federal Reserve is pushing back on diminishing rate hike expectations, and that’s helped to give the dollar a lift,” said Adam Button, chief currency analyst at ForexLive in Toronto.
U.S. monthly jobs data due on Friday will also help set the tone for the greenback, analysts said.
The dollar index, which tracks the greenback against six major peers, was last nearly flat at 106.40. The index had been lower heading into the report.
The dollar index, which remains up sharply for the year so far, had eased recently as investors began reassessing how aggressive the Fed may be with rate hikes.
Against the yen, the dollar was last up 0.6% at 134.05 yen.
The yen’s “safe-haven status is eroding,” Button said. “The dollar is both the source of growth and the safe haven. That’s absolutely super charged dollar gains this year, given the state of monetary policy.”
Friction after the highest-level U.S. visit to Taiwan in 25 years also may help support the U.S. dollar, analysts said. China condemned House of Representatives Speaker Nancy Pelosi’s visit and began six days of military drills surrounding Taiwan. Pelosi left Taiwan on Wednesday after pledging American solidarity during her brief visit.
Against the dollar, the euro was last flat at $1.0165. Reports earlier showed monthly drops in both business activity and retail sales in the euro zone.
Sterling weakened against the dollar. It was last down 0.1% at $1.2145 ahead of a Bank of England policy meeting on Thursday. It is expected to raise rates for the sixth straight time.
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Currency bid prices at 3:31PM (1931 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index
106.4000 106.4400 -0.03% 11.224% +106.8200 +105.9700
Euro/Dollar
$1.0165 $1.0166 +0.00% +0.00% +$1.0212 +$1.0123
Dollar/Yen
134.0500 133.1800 +0.64% +0.00% +134.5400 +132.2950
Euro/Yen
136.27 135.37 +0.66% +0.00% +136.4200 +134.8400
Dollar/Swiss
0.9613 0.9573 +0.43% +0.00% +0.9651 +0.9544
Sterling/Dollar
$1.2145 $1.2158 -0.10% +0.00% +$1.2207 +$1.2100
Dollar/Canadian
1.2838 1.2878 -0.32% +0.00% +1.2892 +1.2833
Aussie/Dollar
$0.6951 $0.6921 +0.48% +0.00% +$0.6953 +$0.6887
Euro/Swiss
0.9770 0.9732 +0.39% +0.00% +0.9783 +0.9725
Euro/Sterling
0.8368 0.8354 +0.17% +0.00% +0.8373 +0.8343
NZ
Dollar/Dollar $0.6275 $0.6255 +0.33% +0.00% +$0.6278 +$0.6214
Dollar/Norway
9.7105 9.7665 -0.44% +0.00% +9.7870 +9.6900
Euro/Norway
9.8752 9.9364 -0.62% +0.00% +9.9477 +9.8586
Dollar/Sweden
10.2066 10.2416 -0.35% +0.00% +10.2689 +10.1849
Euro/Sweden
10.3752 10.4121 -0.35% +0.00% +10.4270 +10.3706
(Additional reporting by Iain Withers in London; Additional reporting by Kevin Buckland in Tokyo and Rae Wee in Singapore; Editing by Andrew Cawthorne, David Holmes, Will Dunham and Nick Zieminski)
The U.S. dollar index measures the value of the U.S. dollar against a basket of foreign currencies. It reflects the strength of the dollar in the global market.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve economic objectives.
Currency hedging is a financial strategy used to protect against potential losses due to fluctuations in exchange rates. It involves using financial instruments to offset risks.
Central banks manage a country's currency, money supply, and interest rates. They implement monetary policy to promote economic stability and growth.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is often measured by the Consumer Price Index (CPI).
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