News Column

Dollar Extends Strong Rally As Fed Debates Rate Hikes

August 20, 2014

WASHINGTON (Alliance News) - The dollar rallied on Wednesday, extending recent gains to its highest levels in almost a year versus a basket of major rivals.

Gains accelerated in the afternoon upon the release of some fairly hawkish Federal Reserve minutes.

The Federal Reserve debated when to hike interest rates amid signs the labor market has moved closer to normal.

Fed forecasts show most officials expect to start raising rates next year, but some members want a "relatively prompt" rate hike, according to the minutes of the Fed's July 30 policy meeting.

The dollar climbed near USD1.33 versus the euro, its best since last November.

Fighting back from early weakness, late day gains took the buck to a 5-month peak of USD1.66 versus the sterling.

The Bank of England's MPC split 7-2 in favor of keeping rates at 0.5%, the first divide in three years, according to the minutes of the BoE's most recent policy meeting. Some members wanted to hike rates in August.

The dollar also surged to its highest since March versus the yen, breaking out of a narrow trading range to fetch Y103.70.

Focus now shifts to Jackson Hole, Wyoming for speeches from the Fed's annual symposium. Chairman Janet Yellen will deliver remarks on Friday that will be scrutinized for any hints that tightening is imminent.

European Central Bank President Mario Draghi will also speak amid pressure for the ECB to offer additional stimulus to jumpstart that region's sluggish economy.

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Source: Alliance News

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