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US dollar rises in anticipation of Fed rate hike soon
[NEW YORK] The US dollar mostly strengthened Tuesday as the market increasingly priced in a Federal Reserve interest rate hike in the next couple of months, helped by hawkish comments from Fed officials.
The British pound, meanwhile, pushed higher as opinion polls suggest that Britain will vote to remain in the European Union in the June 23 referendum and reject the option to exit the 28-nation bloc.
The latest in a series of comments from Fed officials in recent days signaling the central bank could raise rates soon came from Philadelphia Fed President Patrick Harker, who in a speech late Monday said: "I can easily see the possibility of two or three rate hikes over the remainder of the year."
The US dollar jumped to US$1.1141 per euro around 2100 GMT from US$1.1219 at the same time Monday. It rose to 109.99 yen and 0.9932 Swiss francs.
Markets are raising their bets on a rate hike at the July meeting, with odds above 50 per cent for the first time in two months, said Kathy Lien of BK Asset Management.
After raising the federal funds rate in December from near zero where it was for seven years, the Fed has kept its powder dry so far this year as the economy slowed in the first quarter.
Since the data has improved. Official data Tuesday showed new-home sales surged in April to the highest level since January 2008. While that data is known for high volatility, the blockbuster surge prompted analysts to see a strengthening in the housing market, a key sector for US growth.
The pound advanced against both the US dollar and the euro as British public sentiment seemed to be leaning away from a Brexit.
"Opinion polls have shown a growing likelihood of the outcome siding with the camp that wants Britain to renew its membership in the club shared by more than two dozen European nations," said Joe Manimbo, senior market analyst at Western Union Business Solutions.