News Column

Dollar stays firm above 102 yen on higher-than-expected U.S. inflation

June 17, 2014

The U.S. dollar stayed firm above the 102 yen line Wednesday morning in Tokyo, as higher-than-expected U.S. inflation data stirred speculation that the U.S. central bank could raise its key interest rate sooner than previously thought.

At noon, the dollar fetched 102.15-19 yen compared with 102.10-20 yen in New York and 102.03-04 yen in Tokyo at 5 p.m. Tuesday.

The euro was quoted at $1.3546-3550 and 138.39-41 yen against $1.3542-3552 and 138.32-42 yen in New York and $1.3560-3561 and 138.36-40 yen in Tokyo late Tuesday afternoon.

The dollar moved narrowly above the 102 yen line in the morning after drawing buying overnight in New York following a gain in U.S. interest rates, with speculation that the Federal Reserve could move to start raising the interest rate earlier than expected, dealers said.

On Tuesday, the U.S. government said consumer prices rose 0.4 percent in May from the previous month, higher than market expectations and its biggest increase since February 2013.

"Market players had expected the Fed to raise the rate in September or around October," said Shinichiro Kadota, foreign exchange strategist at Barclays Bank. "It seems to be coming a bit earlier" after the release of the inflation data, he added.

But further buying in the dollar was withheld in Tokyo, as market participants await the outcome of a two-day Federal Open Market Committee meeting due later in the day. After the meeting, the Fed plans to announce its economic projections covering economic growth and inflation.

"The Fed is likely to raise its inflation outlook," thus enhancing the prospects for a rate hike at an early date and prompt dollar buying, Kadota said.

The market is also paying attention to post-FOMC remarks by Fed chief Janet Yellen, dealers said.

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Source: Japan Economic Newswire

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