The dollar swung in Asian trade on Tuesday (Jun 27) after a top Federal Reserve official indicated it would raise interest rates further this year, while traders await a speech from Fed boss Janet Yellen.
The greenback surged to a one-month high in the morning, providing buying momentum for Japanese stocks, but gave up the gains as the day wore on.
Business was also subdued by concerns about the future of Donald Trump’s economic agenda as he struggles to push through a controversial health bill.
Expectations for another increase in US borrowing costs were fanned after the head of the New York Fed, Bill Dudley, suggested policymakers could widen their parameters when deciding the course for monetary policy.
And San Francisco Fed president John Williams warned that the world’s top economy could overheat if rates were not lifted at the right time.
They follow Yellen’s increasingly hawkish tone and the bank’s plan to wind down its bond-buying programme to suck excess cash out of financial markets.
Greg McKenna, chief market strategist at AxiTrader, said in a note that “Dudley expanded the Fed’s mandate in a way that suggests he sees the Fed with a broader remit than just inflation and unemployment”.
Yellen is due to speak in London later Tuesday before heading to a central bankers’ conference in Portugal, with her remarks pored over for clues about the Fed’s plans.
The dollar jumped to ¥112.08 at one point Tuesday – its highest level since mid-May – but soon retreated below its late New York levels. However it is still above the ¥111.31 in Tokyo earlier on Monday.