Dollar jumps vs yen as Fed officials hint more rate hikes coming

By Caroline Valetkevitch

NEW YORK (Reuters) – The dollar strengthened sharply against the Japanese yen on Tuesday as remarks by U.S. Federal Reserve officials hinted that more interest rate hikes are coming in the near term.

A trio of Fed officials from across the policy spectrum suggested Tuesday that they and their colleagues remain resolute and united on getting U.S. rates up to a level that will put a dent in activity and inflation.

“We got a steady dose of Fed speak that… triggered a strong move back into the greenback,” said Edward Moya, senior market analyst at Oanda in New York.

“What you’re seeing is that the dollar’s reign is not going to go away any time soon, as the interest rate differential seems like it might get even wider against the yen.”

Investors remain keen to see the U.S. monthly jobs report on Friday.

The U.S. dollar index, which measures the greenback against six peers, was last up 0.9% at 106.31. The index had eased recently as investors began reassessing how aggressive the Fed may be with rate hikes in the future.

Against the yen, the dollar was up 1.2% at 133.12 yen.

The dollar rose to a session higher against the yen as yields in the U.S. Treasury market rallied. U.S. two-year yields, which reflect rate expectations, rose to one-week highs.

Early in the session, the dollar had been weaker against the yen as concern over U.S. House of Representatives Speaker Nancy Pelosi’s visit to Taiwan made investors more risk averse.

Pelosi said her trip demonstrated American solidarity with the Chinese-claimed self-ruled island, but China condemned the highest-level U.S. visit in 25 years as a threat to peace and stability.

The offshore Chinese yuan fell 0.09% versus the greenback at $6.7780 per dollar.

The Australian dollar was down 1.5% in the wake of the Reserve Bank of Australia’s move to raise interest rates by 50 bps to 1.85%, in line with expectations.

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Currency bid prices at 4:30PM (2030 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

106.3100 105.3500 +0.93% 11.130% +106.3400 +105.0300

Euro/Dollar

$1.0164 $1.0260 -0.93% -10.59% +$1.0294 +$1.0164

Dollar/Yen

133.1200 131.6000 +1.19% +15.67% +133.1550 +130.4000

Euro/Yen

135.32 135.05 +0.20% +3.84% +135.4000 +133.4100

Dollar/Swiss

0.9573 0.9500 +0.80% +4.98% +0.9575 +0.9470

Sterling/Dollar

$1.2161 $1.2254 -0.75% -10.07% +$1.2278 +$1.2162

Dollar/Canadian

1.2876 1.2842 +0.27% +1.84% +1.2887 +1.2835

Aussie/Dollar

$0.6920 $0.7027 -1.52% -4.79% +$0.7032 +$0.6913

Euro/Swiss

0.9730 0.9743 -0.13% -6.16% +0.9763 +0.9721

Euro/Sterling

0.8356 0.8374 -0.21% -0.52% +0.8400 +0.8341

nz

Dollar/Dollar $0.6252 $0.6332 -1.26% -8.66% +$0.6343 +$0.6252

Dollar/Norway

9.7715 9.6395 +1.32% +10.86% +9.7730 +9.6425

Euro/Norway

9.9339 9.8846 +0.50% -0.79% +9.9485 +9.8677

Dollar/Sweden

10.2480 10.0946 +0.36% +13.64% +10.2507 +10.0898

Euro/Sweden

10.4178 10.3809 +0.36% +1.80% +10.4230 +10.3678

(Reporting by Caroline Valetkevitch; Additional reporting by Saikat Chatterjee in London; Editing by David Holmes, Susan Fenton and Lisa Shumaker)