By: Barbara Zigah
The US Dollar Index touched a near 2-week peak after Dennis Lockhart, head of the Atlanta branch of the Federal Reserve Bank, said yesterday that he believed a rate hike was still on track for the last quarter of 2015. In general, despite the announcement which followed the Fed’s latest policy meeting, speculation has grown to a near 50-50 chance of a 2015 rate hike. Markets are waiting to hear what Janet Yellen, the Fed chief, will say later today in order to cement their views.
As reported at 12:01 pm (BDT) in London, the US Dollar Index was trading at 95.899 .DXY, a gain of 0.01%, falling away from the recent peak of 96.088 .DXY. The EUR/USD pair was lower at $1.1169, a loss of 0.17% for the Euro. The USD/JPY pair was 0.62% lower at 119.7920 Yen as traders assess the Bank of Japan’s possible next move.
Strong Currency a Problem
Analysts are concerned that the Dollar’s relative strength could worsen US inflation which might compel the Federal Reserve Bank to reconsider the timing of a rate hike. Inflation has been a driving force behind the decision-making process of the Fed, as well as the Bank of Japan and the European Central Bank. A too strong currency negatively impacts not only inflation but trade, and is generally discouraged by the central bank.