Dollar extends gains hitting 8-year high vs yen; Euro drops on Greece

Dollar extends gains hitting 8-year high vs yen; Euro drops on Greece

26 May 2015, 11:06
News
0
645

On Tuesday the dollar extended gains against its peers, rising to eight-year highs against the yen boosted by expectations for higher U.S. interest rates later this year.

Meanwhile, the euro was under heavy selling pressure, as Greek fears continued to linger.

USD/JPY touched the peak of 122.81, the highest since July 2007 and was last at 122.76, up 0.98% for the day.

The greenback was higher across the board after Fed Chair Janet Yellen said on Friday that the central bank still expects to start lifting interest rates this year if the economy continues to improve as expected.

"Transitory factors", including a severe winter, were the reasons for economic slowdown, according to Yellen, who also reiterated that the timing of an initial rate hike would be data dependent.

The greenback was also supported after data showed that underlying inflation in the U.S. rose for a third straight month in April.

The euro remained under heavy selling pressure as fears lingered about the Greek debt situation.

“With Greece-related incentives emerging again, the euro downside is accelerating,” said Michiyoshi Kato, senior vice president of forex sales at Mizuho Bank.

“In any case, we may expect the euro to weaken toward parity (against the dollar),” said Mr. Kato, adding that the eurozone has implemented powerful monetary easing steps, partly in the form of negative interest rates.

Worries about Greece's default emerged after Interior Minister Nikos Voutsis said on Sunday that the country won’t have the money it is due to repay the International Monetary Fund in June unless it reaches a deal with international creditors over further rescue funding. Greece is supposed to repay EUR1.6 billion to the IMF between June 5 and June 19.

Markets will now await the U.S. to release a series of economic data, in particular, the latest durable goods orders for April followed by this month’s CB consumer confidence reading. This month the UoM consumer sentiment number fell dramatically which was quite worrying after the disappointing retail sales figures throughout the winter months.

New home sales from the US as well as the May services and composite PMI readings are also expected later in thе global day.

Finally, Fed member Stanley Fischer is to speak about the global economic outlook at Tel Aviv University.

Share it with friends: