rises versus yen, Fed's Yellen speech in focus
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[March 29, 2016]
By Anirban Nag
LONDON (Reuters) - The dollar rose against
the yen on Tuesday, with the focus on a speech by Federal Reserve chair
Janet Yellen who could give clues on when interest rates could be hiked
later this year.
The dollar index was steady at 95.961, not far from Monday's peak of
96.399, its highest since March 16. The dollar was up 0.2 percent
against the yen at 113.70 yen, while it was slightly lower against
the euro at $1.12.
The outlook on the dollar - which turned firmer last week in large
part due to a series of hawkish comments from Fed officials - will
depend on what Yellen says at a speech to the Economic Club of New
York. She is due to speak on the economic outlook and monetary
policy at 1620 GMT on Tuesday.
"After the optimistic comments we had from other Fed officials in
the recent past, we expect Yellen to be more balanced compared to a
very dovish Fed statement," said Yujiro Gato, currency strategist at
Nomura. "Clearly that will be a driver for the dollar today."
San Francisco Federal Reserve President John Williams said on
Tuesday there is some upside risk that inflation could hit the Fed's
target sooner, but more data is needed to make a convincing
assessment. In a speech earlier, he said recent data reinforced his
expectation that inflation is on track to move back to 2 percent
over the next two years.
The dollar had come under pressure in thin trading conditions on
Monday after soft U.S. consumer spending prompted economists to cut
estimates for first-quarter gross domestic product growth.
The soft data dimmed prospects for an imminent hike in U.S. rates,
which some Federal Reserve officials last week said could be as
early as next month if the economy maintained its momentum. But the
consensus is the U.S. economy is growing at a steady pace and a hike
is likely in June or July.
Dollar bulls preferred to await Yellen's speech, having been hurt
previously when the Fed trimmed its rate path and forecast only two
rate hikes in 2016, compared with four previously.
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"If Yellen does once again push back on any signs of urgency for the
Fed to deliver their next hike, this may once again test how much
the market wants to keep priced into the next few meetings, with 38
percent priced for June and 50 percent for July," said Ned Rumpeltin,
currency strategist at TD Securities.
The yen, meanwhile, underperformed, falling 0.25 percent against the
Traders said speculation of more stimulus and talk that Japanese
Prime Minister Shinzo Abe will delay an unpopular sales tax hike and
call a snap election appeared to be keeping the yen under pressure.
Abe said on Tuesday that he would instruct his government to
front-load spending earmarked in the fiscal 2016 budget as much as
possible to spur growth and denied plans to delay the sales tax
(Additional reporting by Shinichi Saoshiro; Editing by Mark Potter
and Raissa Kasolowsky)
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