US dollar rises against yen as Fed tightens hawkish stance; Euro falls – Reuters | Jewelry Dukan

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  • ECB raises interest rates by 75 basis points
  • The Fed’s Powell says the Fed has to keep it going to get its job done
  • Japan is ready to get involved in the foreign exchange market
  • Britain’s Queen Elizabeth dies; Sterling falls against the dollar

NEW YORK, Sept 8 (Reuters) – The dollar strengthened against the yen on Thursday, rising in nine of the last 10 meetings after Federal Reserve Chair Jerome Powell reiterated that the Federal Reserve will continue to hike interest rates to tame rising inflation and warned against premature easing of monetary policy.

In recent months, the dollar-yen has been the currency pair most sensitive to US interest rate expectations.

Across the Atlantic, the European Central Bank hiked interest rates by a record-breaking 75 basis points (bps), raising the deposit rate above 0% for the first time since 2012. The euro initially rose above parity against the dollar but has softened since Powell’s comments.

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Fed officials will soon enter a blackout period ahead of the central bank’s Sept. 20-21 meeting.

Commenting at a Cato Institute conference, Powell said the Fed must keep going until it has done its job and “strongly commits” to bringing down inflation. [nL1N30F29H]

“I’m not convinced the dollar’s highs are in yet,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“Powell hasn’t added anything new to what he said in Jackson Hole or (Fed Vice Chair Lael) Brainard yesterday, but I expect the dollar to consolidate ahead of the CPI next week,” he added added.

US interest rate futures have priced in an 87% chance that the Fed will hike another 75 basis points at this month’s meeting, taking the fed funds rate to between 3.0% and 3.25%.

The Fed “could very well” make a 75 basis-point hike at its September meeting, Chicago Fed President Charles Evans, who has tended to be on the dovish side of monetary policy debates, said Thursday. Continue reading

Barclays said in its latest research note that it also forecasts a 75 basis point hike this month, noting that it sees an outside chance that a weaker-than-expected CPI read in August will swing the pendulum back toward 50 basis points will let.

In afternoon trade, the dollar was up 0.1% to 143.96 yen. On Tuesday, it rose to a 24-year high of 144.99 yen.

The dollar index was unchanged at 109.63 after rising to its strongest level since June 2002 the previous day.

The euro, on the other hand, fell 0.1% to $0.9994.

The ECB said it expects to hike rates further to dampen demand and is prioritizing the fight against inflation. Continue reading

“We still have a lot of work to do going forward,” ECB President Christine Lagarde told a news conference, adding there was unanimous agreement on the need for a 75 basis-point hike to “front-load” the move towards rates.

The yen, on the other hand, has been a particular victim of recent dollar strength as the Bank of Japan remains the only dovish central bank.

Japan stands ready to take action in the foreign exchange market and will not rule out options to address the “clearly excessive volatility” seen in recent yen moves, the country’s top currency diplomat said after a meeting between the Bank of Japan, the Treasury and Treasury Services Agency.

Traders are eyeing Japanese intervention to boost the yen.

However, Bannockburn’s Chandler believes Japan will not intervene in the market.

“Japan knows that the US does not support intervention,” Chandler said. “Although (US Treasury Secretary Janet) Yellen doesn’t talk about it much, the Fed’s strong dollar policy is alive and well. The strong dollar is part of the tightening of financial conditions.”

In other currencies, sterling fell against the dollar after the death of Queen Elizabeth, Britain’s longest-reigning monarch and the nation’s figurehead for seven decades.

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Currency bid rates at 15:51 (1951 GMT)

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Reporting by Gertrude Chavez-Dreyfuss in New York; Additional reporting by Samuel Indyk in London; Edited by Chizu Nomiyama, Mark Potter, Jonathan Oatis and Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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