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Investors currently see a 24% chance of the Fed raising rates at its September meeting
The dollar improved Tuesday as investors continued to assess the outlook for U.S. interest-rate increases this year.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, was up 0.5% at 86.96, a one-month high.
The dollar rose 0.9% to ¥102.825. The euro fell 0.5% to $1.11385.
Investors now see a 24% chance that the Fed will raise rates at its meeting next month and a 57% chance of an increase by December, according to CME Group data.
Higher rates tend to boost the dollar by making dollar-denominated assets more attractive.
But many investors believe the positive impact of an interest-rate increase on the dollar will be muted as the Fed is expected to tighten at a much slower pace than in the past.
”Markets have fully bought into the idea that hikes will be decided independently rather than with the regularity of a normal cycle, and the side effect is that the currency reaction to each hike is positive but limited,” analysts at RBC Capital Markets LLC wrote in a research note.
Fed officials have indicated that a near-term decision on interest rates depends on data remaining strong. Fed Vice Chair Stanley Fischer said Tuesday in a Bloomberg television interview that the pace of rate increases will depend on the economy’s performance.
Investors are now looking ahead to Friday’s U.S. jobs report, which many investors see as the best indicator of the health of the labor market.
Meanwhile, the dollar was also higher against emerging-market currencies. The dollar rose 0.7% against the Mexican peso and 0.5% against the South African rand.
WSJ
