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US dollar firms as Yellen signals path to rate hike

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The US dollar firmed on Wednesday, bolstered by Federal Reserve Chair Janet Yellen's signal that the US economy looks strong enough for an interest rate hike this month.

[New York] The US dollar firmed on Wednesday, bolstered by Federal Reserve Chair Janet Yellen's signal that the US economy looks strong enough for an interest rate hike this month.

The euro, meanwhile, was under pressure as traders expect the European Central Bank to announce additional stimulus to fight low inflation and tepid growth in the eurozone after a policy meeting on Thursday.

Ms Yellen's remarks that the US economy will continue to grow steadily and that risks had diminished highlighted the diverging policies of the two central banks.

US labour data also was supportive of a rate hike at the Federal Open Market Committee's December 15-16 policy meeting. Payrolls firm ADP reported US companies added 217,000 jobs in November, the strongest pace since June.

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Market voices on:

"The dollar soared to fresh highs as US jobs data and the tone of remarks from the Fed chair suggested full steam ahead for a US rate hike in two weeks," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

"Fed Chair Janet Yellen said that global risks had abated since the summer and that she was 'looking forward' to raising interest rates since it would signal confidence in the economy," he said.

The euro slipped to US$1.0553 before regaining some ground, trading at US$1.0619 around 2200 GMT. The dollar rose 0.8 per cent to 123.81 yen.

Meanwhile, traders looked ahead to the ECB's decision.

"The ECB has committed itself to easing on Thursday, and this is an opportunity for the central bank to surprise markets by being aggressive," said Moody's Analytics.

AFP

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