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Dollar higher as U.S. data supports Fed rate hike view

2017-7-11 10:25:10Basics of Trading
Dollar higher as U.S. data supports Fed rate hike view

 The dollar was higher against a basket of the other major currencies on Monday as a stronger-than-expected U.S. jobs report indicated that the Federal Reserve would stick to plans for a third rate hike this year.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.11% to 95.89 by 10.44 AM ET.

The U.S. economy added 222,000 jobs last month the Labor Department reported on Friday, more than the 179,000 new jobs expected by economists.

The rapid pace of jobs growth reassured investors that the economy is on a strong enough footing to justify the Fed’s plans to raise interest rates once more this year.

The Fed hiked rates at its June meeting and stuck to its forecast for one more rate hike this year, but concerns over the subdued inflation outlook had raised doubts over whether officials would be able to stick to their planned tightening path.

USD/JPY was up 0.25% at 114.18 after rising as high as 114.3 earlier, its highest level since May 11.

Bank of Japan Governor Haruhiko Kuroda in a speech on Monday reiterated that the bank is resolved to keep its stimulus program in place until inflation is in line with its 2% target.

The remarks underlined the divergent monetary policy outlook between the BoJ and its peers in the U.S. and Europe.

EUR/JPY was at 130.04 after touching a high of 130.38 earlier, the most since February 2016.

Comments by European Central Bank President Mario Draghi last month appeared to open the door to monetary policy adjustments, fueling speculation the bank could start to scale back its stimulus program as soon as September.

Last week’s minutes of the ECB June meeting showed that officials discussed removing the easing bias from its latest monetary policy statement, before deciding against it.

The euro was fractionally lower against the dollar, with EUR/USD edging down to 1.1389.