Dollar climbs against yen as Fed eyed for lift-off signal

[June 17, 2015]  By Jemima Kelly

LONDON (Reuters) - The dollar rose against the yen and Antipodean currencies on Wednesday, as investors awaited a Federal Reserve statement that could bolster bets that interest rates will rise for the first time in almost a decade in September.

The Swiss franc, meanwhile, rallied across the board, climbing to a two-week high against the euro as fears that debt-stricken Greece could default and tumble out of the euro zone drove investors in search of safety.

The statement from the Fed's rate-setting committee, the FOMC, is due to be released at 1800 GMT. Investors expect policymakers to intimate that U.S. rates will start rising later this year, after news that U.S. housing permits for future construction surged to a near eight-year high.

The dollar gained 0.4 percent against the yen to 123.86, not far from a 13-year high of 125.86 touched earlier this month.

"The bottom line for us is still that we think we're on track for a September rate hike," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.

"We don't think the FOMC will be so bold as to spell that out explicitly, but we certainly wouldn't expect to hear anything that is not consistent with a September rate hike ... On balance we'd be dollar positive."

With the Reserve Bank of New Zealand looking set, in contrast to the Fed, for further rate hikes, the Kiwi dollar hit a five-year low against its U.S. counterpart of $0.6919. The Australian dollar also fell one percent, to $0.7672.

The Greek central bank warned on Wednesday that the country would be put on a "painful course" towards default and exiting the euro zone if the government and its international creditors failed to reach an agreement on an aid-for-reforms deal.

As Greek bonds sold off, the Swiss franc, often seen as a safe haven by investors attracted by Switzerland's healthy current account surplus, gained as much as 0.8 percent against the euro to hit a two-week high of 1.0404 francs, before easing a little to 1.0451 francs.

"The implication that a Greek default is getting closer this week has been behind the increased demand for the Swiss franc, and it will remain so unless we get a deal in the next few days," said Jane Foley, senior currency strategist at Rabobank in London.

A Swiss National Bank meeting on Thursday will be watched for any indications the bank is ready to loosen monetary policy further, but Foley said even a rate cut would not weaken demand from investors and Greeks worried about the possibility of capital controls.

The euro edged up 0.1 percent to $1.1264.

(Additional reporting by Hideyuki Sano and Tomo Uetake in Tokyo and Wayne Cole in Sydney; Editing by Catherine Evans)
 

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