Dollar climbs to seven-month peak on rate hike bets; pound plunges
The dollar surged to a seven-month high against a major currency basket on Tuesday, as investors increased bets the Federal Reserve would raise interest rates in December following a round of generally solid U.S. economic data over the last few weeks.
In the United States, investors are looking to Wednesday's release of the latest Fed monetary policy meeting's minutes for confirmation of the market's December rate hike view. The rate futures market has attached a roughly 70 percent probability the Fed will lift rates at the December meeting
In late trading the dollar index .DXY, which measures the greenback against six major currencies, rose 0.8 percent to 97.650 after hitting its highest since March.
The euro fell to a more than two-month low against the dollar, and was last down 0.8 percent at $1.1054 EUR=.
Fed's Kashkari says U.S. economy has room to run
Minneapolis Federal Reserve President Neel Kashkari said on Tuesday the Fed should continue to focus on further progress in the U.S. labor market until inflation pressures emerge.
"My view is let's let the economy keep creating jobs, bringing workers off the sidelines so long as it's not creating inflation," Kashkari said at a town hall meeting in Minnesota streamed live on the bank's website.
Kashkari has yet to comment on when he prefers to see a rate increase and has said more patience is less risky than raising the benchmark interest rate too soon.
Evans Pushes Go-Slow Tightening Pace as Next Fed Hike Looms
The U.S. economy probably isn’t at full employment and inflation remains below-target, Federal Reserve Bank of Chicago President Charles Evans said as he argued for keeping interest rates low until core inflation moves higher.
“Repairing damage incurred from the Great Recession continues to be critical for improving labor force quality for stronger, long-lasting growth,” Evans said, according to a text of his remarks prepared for delivering in Sydney on Tuesday. In this context, “incorrectly inferring that U.S. is at full employment; and prematurely tightening policy would carry particularly high social costs.”
In Sydney, reporters again asked Evans about a rate increase at the end of the year.
“A December move could be fine,” Evans said. “It depends on the ultimate strategy of whether or not we think, absolutely, beginning more renormalization is right. Sometimes I think we’d be well served if we were to wait a little bit longer and allow inflation to pick up more quickly.”
Oil edges up before producer talks on output curbs
Crude futures inched up on Wednesday, with investors waiting for talks between OPEC producers and other oil exporters on curbing output to end a glut in the global market.
Brent crude LCOc1 was up 9 cents at $52.50 a barrel at 0012 GMT. It fell 73 cents, or 1.4 percent, to close at $52.41 a barrel on Tuesday, retreating from a one-year high of $53.73 hit on Monday.
Reference: Reuters, Bloomberg
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