The dollar hit a three-month high against a basket of major currencies and a two-month peak versus the yen on Thursday, underpinned by comments from Federal Reserve officials suggesting a growing chance of an interest rate hike next month.
Remarks from Fed Chair Janet Yellen on Wednesday boosted the dollar, with the effect carrying over to Thursday’s session. The chances for a December rate hike are now perceived as higher than 50 percent after Yellen laid out what appeared to be the base case at the U.S. central bank that the economy is ready for higher rates.
Driving home the point, New York Fed President William Dudley later Wednesday said he would “completely agree” with Yellen that December is a “live possibility” for raising rates.
The greenback fell to a session low against the euro EUR= on Thursday after unexpectedly weak data on U.S. jobless claims but largely rebounded and was last up 0.02 percent at $1.0860.
U.S. jobless claims showed the biggest weekly rise in eight months but the level was still considered consistent with an improving labor market.
The dollar broke out of its recent 120.00 to 121.60 range against the yen JPY= to reach a two-month high of 122.00 yen. It was last up 0.1 percent at 121.66 yen.
“Certainly jobless claims are not what’s moving the markets this morning,” said Joseph Trevisani. “This morning has more to do with the central bank comments we’ve had over the past week or so, especially what Ms. Yellen and Mr. Dudley had to say yesterday. The markets will tell us that they’re going to hike unless there’s some intervening event to interrupt it.”
The dollar index .DXY, which tracks the greenback against six major peers, was up 0.1 percent at 98.034, having gained 0.8 percent on Wednesday.
The dollar rose more than 1 percent against sterling GBP= after the Bank of England kept rates unchanged at 0.5 percent and gave no suggestion it was in any hurry to raise them.
Investors quickly moved expectations of a BoE rate increase from early 2016 back to the end of next year, with a rate hike now not fully priced in until well into 2017.