Dollar strengthens broadly - Navtej Kohli
Tuesday, June 10th, 2008‘Dollar boosted by Bernanke inflation comments’, that goes the headline on Reuters business news section. Navtej Kohli business blog looks closely into the matter.
The dollar strengthened broadly, reaching a three-month high against the yen after Federal Reserve Chairman Ben Bernanke warned on the risks of inflation, stoking expectations of U.S. interest rate rises.
Bernanke said that the central bank would strongly resist rising inflation expectations, and that the latest surge in energy prices is adding to the dangers from price pressures.
He added that the risk of a substantial downturn in the U.S. economy has receded, sparking broad dollar gains and sending U.S. bond yields soaring.
“Bernanke’s the only thing moving markets. There’s been a big shift in expectations towards … Fed rate hikes and this has lifted the dollar,” said Adam Cole, global head of FX currency strategy at RBC Capital Markets.
The interest rate futures market is now pricing in 70 basis points worth of rises in U.S. rates from the current 2 percent by the end of the year FEDWATCH.
By 0806 GMT the dollar was up 0.3 percent to 106.65 yen, having earlier hit a three month high of 106.83 yen <JPY=>.
The euro was down 0.43 percent at $1.5571 <EUR=> while the dollar was up 0.45 percent against a basket of currencies to 73.209 .DXY.
Courtesy: Reuters