Investing.com – The US dollar rose on Wednesday, rebounding from recent weakness as several Federal Reserve officials spoke out.
At 04:20 EDT (08:20 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, was up 0.2% at 105.500, pulling away from a nearly one-month low last week. .
More Fed speeches await
The dollar received a slight boost late Tuesday after the head of the Federal Reserve Bank of Minneapolis signaled that stubborn inflation and a strong economy could convince the US central bank to keep interest rates unchanged for the rest of this year.
The path of US interest rates continues to dominate market attention, and with no top-tier US economic data due this week, the views of policymakers take on added importance.
The Fed Chairman essentially ruled out further tightening last week, but there is a great deal of uncertainty about when a move lower will occur.
Investors have no shortage of Fed officials to look forward to on Wednesday, as the vice president, governor and head of the Federal Reserve Bank are scheduled to speak in Boston.
Morgan Stanley now expects the Fed to begin cutting interest rates from September, compared to its previous forecast in July, while continuing to see three 25 basis point rate cuts during the year.
“The reversal in major components suggests lower inflation ahead, but given the lack of progress in recent months, it will take a little longer for the FOMC to gain confidence to take the first step,” the bank said in a May 7 note.
Remove ads
.
German economy 'still suffering'
In Europe, trading fell 0.2% to 1.0736, after data showed a 0.4% decline in March on a monthly basis.
“The renewed contraction in industrial production in March after two months of expansion is a reminder that the German economy is still suffering,” analysts at Capital Economics said.
The European Central Bank has signaled a rate cut in June, but there is still a great deal of uncertainty about what will happen to monetary policy next.
Its trading fell 0.3% to 1.2473, ahead of Thursday's meeting of .
The Bank of England is not expected to change interest rates this week, and there is speculation that it may steer markets towards a cut as soon as next month – shortly after the European Central Bank expects to cut interest rates on June 6.
Yen declines despite talk of intervention
In Asia, it rose 0.4% to 155.35, as the yen weakened, returning towards its highest levels in 34 years of more than 160 yen recorded last week, even as government officials continued their warnings of possible further intervention in currency markets.
Bank of Japan Governor Kazuo Ueda said on Wednesday that the central bank may take monetary policy measures if the yen's decline affects prices significantly, while Japanese Finance Minister Shunichi Suzuki repeated a warning that authorities are ready to respond to highly volatile moves in the currency market.
The index fell 0.4% to 0.6568, continuing its sharp declines from the previous session after taking a less hawkish tone than traders expected.
Remove ads
.
While the Reserve Bank of Australia held interest rates steady and warned that inflation would remain steady in the coming months, it stopped short of threatening to raise interest rates further – a scenario that had been priced into the Australian dollar in the run-up to the meeting.