Dollar Set for Best Gains in Six Weeks as Traders Weigh Fed Pace
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(Bloomberg) — A gauge of the dollar held a six-day climb, heading for its best week since the start of November, as traders nudged forward expectations for the next Federal Reserve interest- rate increase.
The greenback strengthened against 14 of 16 major peers this week as futures traders raised to 49 percent the odds of an April rate hike. Richmond Fed President Jeffrey Lacker will discuss the economic outlook for 2016 at a conference Friday, the first speech from a Federal Open Market Committee member since Wednesday’s decision.
“There is still scope for more dollar gains if the U.S. data improve and Fed speakers such as Lacker start sounding more hawkish regarding the pace of tightening,” said Khoon Goh, a senior strategist at Australia & New Zealand Banking Group Ltd. in Singapore. Policy makers’ projections “suggest four hikes next year, while markets are only pricing in two. ”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was at 1,238.21 as of 9:21 a.m. in Tokyo from 1,239.22 Thursday, strengthening 1 percent since Dec. 11 to be poised for its biggest weekly advance since Nov. 6. The greenback was little changed at $1.0836 per euro and 122.51 yen.
The greenback strengthened against 14 of 16 major peers this week as futures traders raised to 49 percent the odds of an April rate hike. Richmond Fed President Jeffrey Lacker will discuss the economic outlook for 2016 at a conference Friday, the first speech from a Federal Open Market Committee member since Wednesday’s decision.
“There is still scope for more dollar gains if the U.S. data improve and Fed speakers such as Lacker start sounding more hawkish regarding the pace of tightening,” said Khoon Goh, a senior strategist at Australia & New Zealand Banking Group Ltd. in Singapore. Policy makers’ projections “suggest four hikes next year, while markets are only pricing in two. ”
The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, was at 1,238.21 as of 9:21 a.m. in Tokyo from 1,239.22 Thursday, strengthening 1 percent since Dec. 11 to be poised for its biggest weekly advance since Nov. 6. The greenback was little changed at $1.0836 per euro and 122.51 yen.
Rate Projections
The dollar gauge Thursday reached the highest in data going back to early 2005 after the Fed unanimously voted to raise its benchmark for the first time since 2006. Policy makers maintained projections, known as dots, for four rate increases next year, while emphasizing the gradual pace.
The decision preserved expectations for further U.S. divergence from other major central banks, with the focus now shifting to how quickly the next rate move will come.
There’s a greater than 50 percent probability that the Fed will lift rates again in June, with pricing rising over 90 percent only from the December 2016 meeting on, data compiled by Bloomberg show.
The Fed projections “were much more hawkish than I was expecting,” said Roger Hallam, chief investment officer for currencies at JPMorgan Asset Management, in an interview in London. “We’ve been constructive on the dollar for the last couple of years and remain so.”
The decision preserved expectations for further U.S. divergence from other major central banks, with the focus now shifting to how quickly the next rate move will come.
There’s a greater than 50 percent probability that the Fed will lift rates again in June, with pricing rising over 90 percent only from the December 2016 meeting on, data compiled by Bloomberg show.
The Fed projections “were much more hawkish than I was expecting,” said Roger Hallam, chief investment officer for currencies at JPMorgan Asset Management, in an interview in London. “We’ve been constructive on the dollar for the last couple of years and remain so.”
To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Netty Ismail in Singapore at nismail3@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Jonathan Annells
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