Traders pushed up the dollar, while sending stocks and commodities down as comments from a Federal Reserve official bolstered speculation that U.S. borrowing costs will rise this year.
Most major currencies fell against the greenback after Fed Vice Chairman Stanley Fischer said the world’s largest economy is close to meeting the central bank’s goals and that growth will pick up. While he gave no indication on the timing of a rate hike, his remarks echoed signals from officials last week indicating the market is underestimating the likelihood of tightening.
A gauge of the dollar halted a two-day advance as traders awaited further signs that the Federal Reserve is ready to raise interest rates by the end of this year.
The greenback retreated against most of its 16 major counterparts before Fed Chair Janet Yellen speaks Friday at an annual symposium in Jackson Hole, Wyoming. The dollar climbed versus the yen and euro on Monday after Fed Vice Chairman Stanley Fischer said over the weekend that the U.S. economy is close to meeting the central bank’s goals, suggesting a rate increase by December.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 peers, rose 0.2 percent as of 4 p.m. in New York as speculation on higher borrowing costs boosted the currency’s appeal. It strengthened 0.1 percent to 100.32 yen, and was little changed at $1.1322 per euro. The British pound gained.
“There are still four months left to the year, so any hawkish comments spark dollar buying only briefly,” said Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank in New York. “Market focus will have to be on Jackson Hole and whether Yellen indicates an intention to raise rates this year. The dollar is looking vulnerable.”
Oil settled down more than 3 percent on Monday, retreating from last week's two-month highs, on worries about burgeoning Chinese fuel exports, more Iraqi and Nigerian crude shipments and a rising U.S. oil rig count.
U.S. West Texas Intermediate (WTI) crude's front-month contract, September CLU6, closed down $1.47, or 3 percent, at $47.05 before expiring. It hit a six-week high of $48.75 on Friday. WTI's more active second month position, October CLV6, closed down $1.70, or 3.6 percent, at $47.41 a barrel.
"Oil prices will likely experience another short-term dip in the coming weeks," Barclay's Bank said, while Morgan Stanley said that, "Positioning data seems to confirm our view that the latest oil bounce is more technical and positioning-oriented than fundamental. In fact, new buyers have been mostly absent the past few months."
Reference: Reuters, Bloomberg
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