Fed rate hike talk continued to drive the dollar higher on Thursday, helping the dollar index climb to a one-week high of 96.30 during Asian trading. St. Louis Fed President James Bullard was another Fed official to speak this week. In an interview on Bloomberg TV yesterday, Bullard said the Fed runs the risk of overshooting its inflation target. However, he also expressed concern about raising interest rates at a time of weak inflation expectations.
The dollar attempted to break above 113 yen in late Asian session, stopping just shy of the level at 112.99 yen. The euro and the pound were both heading for a fourth straight day of losses against the greenback. The single currency was down at 1.1158 dollars, while sterling was at 1.4090 dollars.
Another currency coming under pressure this week from the strong dollar is the Chinese yuan. The People’s Bank of China fixed Thursday’s midpoint 0.33% weaker at 6.5150 per dollar. This was the sharpest daily drop in the midpoint in more than two months. It also comes amid fresh reassurances from China’s premier today that the government has enough policy tools to keep the economy stable.
Meanwhile, in Japan, the Bank of Japan’s summary of the March policy meeting revealed one board member suggested to roll back the negative rate policy given its drawbacks, but was worried that abandoning it now would damage confidence in the central bank even more. There is also growing speculation that the Japanese government will announce a fresh fiscal stimulus package before the parliamentary elections in July.
Commodity prices continued to be weighed down by the strong dollar, and this is hurting currencies such as the Australian and Canadian dollars. The Australian dollar dropped below the 0.75 level for the first time in a week in today’s Asian session and was last trading at 0.7488 versus the greenback. The loonie also extended its losses, declining to 1.3263 per US dollar.
The New Zealand dollar got a small lift from better-than-expected trade data, climbing to 0.6721 at the start of Asian trading. But it soon reversed to trend lower with other commodity-linked currencies, dropping below the 0.67 level to stand at 0.6683 in late session.
Gold and crude oil prices suffered losses of over 2% yesterday as the increasing prospect of an April or June rate hike by the Fed dragged commodity prices lower. Gold was last trading at $1216 an ounce, while US oil futures were at a one-week low of $39.33 a barrel.
Coming up later today, UK retail sales and US durable goods orders will be the key data of the day, along with the latest Baker Hughes US rig count.
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