Dollar gains as Fed
sticks to guns on policy tightening
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[June 15, 2017]
By Ritvik Carvalho
LONDON
(Reuters) - The dollar inched higher on Thursday, with expectations of
another Federal Reserve rate hike this year kept alive by a policy
meeting that also pointed the way to a trimming of the huge emergency
funds pumped into the economy since 2009.
As widely expected, the Fed raised interest rates a quarter percentage
point to a target range of 1.0-1.25 percent on Wednesday but it also
gave its first clear outline on its plan to reduce its $4.2-trillion
bond portfolio.
That undid all of the damage done to the greenback earlier in the day
and pushed it higher as European traders got down to business on
Thursday.
By 0806 GMT, the index which measures the dollar's broader strength was
up 0.2 percent at 97.145 <.DXY>.
"Market expectations may have been more on the dovish side, the Fed did
not confirm them - they kept the rate outlook very much stable,
supported and they did not react on somewhat weaker data of late," said
Manuel Oliveri, currency strategist with Credit Agricole in London.
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"Long term Fed expectations remain very much supported - that is the
main reason why the dollar is remaining supported for now."
A Reuters poll of 21 of the 23 primary dealers that do business directly
with the Fed showed 14 of them now believed it would announce the start
of its balance sheet normalization at its Sept. 19-20 policy meeting.
The rest of them said it would make such a move at its Dec. 12-13
meeting.
Deepening political turmoil in Washington did not seem to weigh on the
greenback after the Washington Post reported that U.S. President Donald
Trump is being investigated by special counsel Robert Mueller for
possible obstruction of justice.
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A U.S. five dollar note is seen in this illustration photo June 1,
2017. REUTERS/Thomas White/Illustration/File Photo
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Against its Japanese counterpart, the dollar rose 0.1 percent to 109.57
yen <JPY=EBS>, above Wednesday's eight-week low of 108.81 yen.
On Friday, the Bank of Japan is widely expected to keep its monetary
policy unchanged, and reassure markets it will lag the Fed in tapering
its massive stimulus program, as Japan's inflation remains low despite a
strengthening economy.
The euro <EUR=> was 0.3 percent lower at $1.1191, down a full cent from
a seven-month peak of $1.1296 scaled overnight.
The Australian dollar <AUD=D4> rose 0.2 percent to $0.7599, moving back
toward its 2-1/2-month high of $0.7636 hit on Wednesday, after a
better-than-forecast employment report.
But the New Zealand dollar skidded 0.7 percent to $0.7222 <NZD=D4>,
moving away from the previous session's four-month high of $0.7319.
Data showed that New Zealand's economy grew 0.5 percent in the three
months to March, lower than the 0.7 percent growth forecast in a Reuters
poll and well below the central bank's forecast for 0.9 percent growth.
(Reporting by Ritvik Carvalho; Editing by Keith Weir)
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