Dollar rises to
three-month high vs. yen before U.S. GDP data
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[October 28, 2016]
By Anirban Nag
LONDON
(Reuters) - The dollar advanced to a three-month high against the yen on
Friday, on track for monthly gains against most major currencies as
investors waited for U.S. third-quarter growth data later in the day.
A solid number would give the Federal Reserve an opportunity to upgrade
the economic assessment in the November statement and boost prospects
for a December rate hike. It could also help reassure stock markets,
which would be supportive of the dollar against the safe-haven yen,
traders said.
A disappointing result, however, could trigger a fall in the dollar, a
scenario that played out in late July when U.S. second-quarter gross
domestic product data came in weak.
The median forecast in a Reuters poll is for the U.S. advance
third-quarter GDP data to show growth of 2.5 percent, up from 1.4
percent in the previous quarter.
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"We expect an annualized 2.9 percent quarter-on-quarter growth,"
Commerzbank currency strategist Antje Praefcke said, noting that
positive trade data issued on Wednesday had raised the chances of a
better-than-expected outcome.
"That would come as a surprise to the market and may cause the dollar to
appreciate."
The dollar was steady at 105.30, having risen in early London trade to
105.42 yen, its highest level since July, with gains underpinned by
higher U.S. Treasury yields and a rise in U.S. three-month LIBOR.
That rate - key for inter-bank lending - hit its highest since 2009
in part due to growing expectations of a rate hike in December.
U.S. interest rate futures are implying a more than 75-percent chance of
the Fed raising interest rates by December, according to the CME Group's
FedWatch tool.
A rise in U.S. bond yields has helped bolster the dollar in recent
weeks, the greenback having risen 3.8 percent against the yen so far
this month, its biggest monthly gain since May.
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Light is cast on a U.S. one-hundred dollar bill next to a Japanese
10,000 yen note in this picture illustration shot February 28, 2013.
REUTERS/Shohei Miyano/Illustration/File Photo
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The euro edged higher to $1.0910, but was down nearly 3 percent for the
month. German inflation data accelerated in October, although French
inflation fell short of expectations. Inflation for the whole euro zone
is due on Monday.
"Expect euro/dollar to come under pressure from a robust U.S. GDP print,
with a weekly close below $1.0850 confirmation of the short-term bearish
bias," ING currency strategist Viraj Patel said.
Meanwhile, sterling fell, hitting an eight-day low against the euro <EURGBP=D4>
<GBP=>, after Northern Ireland's High Court ruled that the law of the
province did not restrict Britain's ability to trigger an exit from the
European Union.
A similar case has been taken to London's High Court, with campaigners
arguing the government does not have the authority to trigger Article 50
without parliament's explicit support.
(Editing by Louise Ireland)
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