Dollar remains close to 14-month peak on U.S. rate hike talk

Dollar remains close to 14-month peak on U.S. rate hike talk

10 September 2014, 13:05

On Wednesday the dollar kept up near 14-month highs against the other major currencies, as growing expectations for an early hike in U.S. interest rates continued to raise the US currency.

The euro held above 14-month lows against the dollar, with EUR/USD last down 0.10% at 1.2926. The euro remained weaker after the European Central Bank unexpectedly cut rates to record lows across the euro zone last week and unveiled new easing measures in a bid to shore up the faltering recovery and boost inflation.

GBP/USD was at 1.6088, close to 10-month lows of 1.6057 hit on Tuesday after a new opinion poll showed that support for Scottish pro-independence voters increased ahead of next week’s vote.

Uncertainty over what currency an independent Scotland would use, as well as concerns over how much of the U.K. national debt it would take on have prompted investors to exit positions in sterling.

USD/JPY rose to fresh six year highs and was last up 0.56% to 106.78. The yen remained under pressure after data on Monday showing that Japan’s second quarter economic contraction was larger than initially estimated, and another report showing that the country’s current account surplus fell short of expectations in July.

The weak data indicated the economy is struggling to gain momentum and fuelled expectations for more stimulus from the Bank of Japan.

Meanwhile, expectations that the Federal Reserve is growing closer to raising interest rates have continued to support demand for the greenback. The Fed was expected to cut its asset purchase program by another $10 billion at its upcoming policy meeting next week which would keep it on track for winding up the program in October, and to start raising interest rates sometime in mid-2015. A study by the San Francisco Federal Reserve published on Monday indicated that Fed officials see rates rising earlier than markets expect.

USD/CHF edged up 0.16%, still trading near one year highs at 0.9342.

The Australian and New Zealand dollars were lower, with AUD/USD tumbling 0.90% to 0.9120 and with NZD/USD sliding 0.39% to 0.8214, while USD/CAD rose 0.25% to 1.1009.

The Westpac Banking Corporation earlier reported that consumer sentiment in Australia declined by 4.6% this month, after a 3.8% rise in August.

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