FX Roundup: Yellen comments sustain dollar rally

The dollar posted upticks against major currency crosses in European trading on Thursday, extending overnight gains further on comments about a possible US interest rate hike by Federal Reserve Chairwoman Janet Yellen.

At 1617 GMT, the dollar was up 0.07% against the yen exchanging at JPY121.66. In tandem, the pound and euro fell 0.92% and 0.02% to exchange at $1.5245 and $1.0867 respectively. Completing a clean sweep of major crosses for the third successive session, the greenback also rose 0.27% against the Swiss franc exchanging at CHF0.9961.

Late on Wednesday, Yellen said an interest rate hike in December remained on the cards. “At this point, I see the US economy as performing well. Domestic spending has been growing at a solid pace and if the data continue to point to growth and firmer prices, a December rate hike would be a live possibility.”

Kit Juckes, head of forex at Societe Generale, said, “Maybe the secret to getting the Fed to (finally) move is just to pretend really hard that we don't care. Yellen and co have done a stalwart job of over-hyping the start of policy normalisation, but still, I'm struck today that markets are doing a much better job of not caring too much.

“That of course, is a recipe for a flatter US dollar curve and a steeper euro curve as policy divergence goes into hyper-drive and the growth gulf deepens.”

Earlier in the session, the Bank of England’s Monetary Policy Committee voted by eight to one to keep the bank rate at 0.5% and was unanimous in its decision to hold the size of the asset purchase facility at £375bn, as expected. It resulted in a selloff of the pound across global currency markets.

FXTM research analyst Lukman Otunuga said: “The BoE’s hesitance to act may be derived from fears concerning the slowdown in the global economy, and the declining UK CPI readings which have followed a downward trajectory will continue to make the central bank wary on rate hike timings.

“Investors have been left empty handed once more as speculations mount on when or if the BoE will ever move forward with a rate hike. There seems to be a pattern among the central banks, as it seems that the ECB, BoJ and BoE may be in a mode of standby waiting for the Fed to act, before moving forward in 2016 or even 2017.”

Elsewhere, the New Zealand dollar reversed recent declines against its US counterpart, rising 0.47% to change hands at US$0.6625. Other commodities linked currencies also traded higher, with the dollar down 0.84% and broadly flat against the Norwegian Krone and Canadian dollar to change hands NOK8.5570 and CAD$1.3158 respectively.

However, the Australian dollar was still in the red, albeit marginally, changing hands at US$0.7146, down 0.04%. In the Americas, the dollar traded higher against the Chilean peso (up 0.48%), Mexican peso (up 0.38%) and Colombian peso (up 0.98%) but fell against the Brazilian real (down 0.29%).