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(Bloomberg) — The dollar maintained an advance against most major peers as the odds of a December interest rate increase climbed, with data due Tuesday forecast to show the U.S. economy last quarter expanded more than previously reported.
The greenback traded near a seven-month high against the euro after San Francisco Fed President John Williams said there is a “strong case” for a rate increase in December if U.S. data hold up. Australia’s dollar remained lower before central bank Governor Glenn Stevens speaks Tuesday.   “Monday’s trade showed that there is still fuel for the U.S. dollar in the prospect of Fed tightening in December,” said Sean Callow, a foreign-exchange strategist in Sydney at Westpac Banking Corp. “While some are eager to sell the fact of a December tightening by talking about a dovish hike, if you try to sell the dollar in December, you buy what?”

The dollar fetched $1.0630 per euro as of 8:42 a.m. in Tokyo from $1.0636 on Monday, when it touched $1.0593, the strongest since April 15. The greenback was little changed at 122.91 yen from 122.84.

The U.S. will revise its estimate of third-quarter gross domestic product to 2.1 percent from 1.5 percent, according to economists in a Bloomberg survey before data due Tuesday.

Futures Signal

“Assuming that we continue to get good data on the economy, continue to get signs that we’re moving closer to achieving our goals” and are gaining confidence that inflation will move back toward the Fed’s 2 percent target, there’s “a strong case that can be made in December to raise rates,” Williams said Nov. 21, speaking with reporters at the University of California at Berkeley.

Traders saw a 74 percent chance on Monday that the Fed will raise its benchmark rate at its next meeting, according to futures data compiled by Bloomberg. That’s up from 50 percent at the end of October. The calculation assumes the effective fed funds rate averages 0.375 percent after the first increase, compared with the current zero-to-0.25 percent target range.

The Australian dollar declined Monday, paring this month’s advance, as metal prices plunged. The Aussie fetched 71.94 U.S. cents, following a 0.7 percent drop to 71.92. It has strengthened 0.8 percent since Oct. 30.

RBA’s Stevens “may use the opportunity to talk the Australian dollar lower to assist the low inflation outlook, and because commodity prices have continued to fall, but the Australian dollar hasn’t,” Richard Grace, the chief currency and rates strategist at Commonwealth Bank of Australia in Sydney, wrote in a research note.

To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda, Jonathan Annells