Dollar jumps against yen as Fed officials hint more rate hikes to come

NEW YORK, Aug. 2 (Reuters) – The dollar strengthened sharply against the Japanese yen on Tuesday, after comments from US Federal Reserve officials indicated more interest rate hikes in the near term.

A trio of Fed officials from across the policy spectrum suggested Tuesday that they and their colleagues remain determined and united to get US rates at levels that will dent activity and inflation. read more

“We were getting a steady dose of Fed talk that … caused a strong move back to the dollar,” said Edward Moya, senior market analyst at Oanda in New York.

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“What you see is that dollar dominance is not going to go away anytime soon as the interest rate differential seems to be widening against the yen.”

Investors continue to look forward to Friday’s US monthly jobs report.

The US dollar index, which measures the greenback against six peers, recently rose 0.9% to 106.31. The index had eased recently as investors began to reassess how aggressive the Fed could be with rate hikes going forward.

Against the yen, the dollar rose 1.2% to 133.12 yen.

The dollar rose to a session higher against the yen as US Treasury yields rose. The US two-year yield, which reflects interest rate expectations, rose to a week-long high.

Early in the session, the dollar had weakened against the yen as concerns over the visit of House Speaker Nancy Pelosi to Taiwan made investors more risk averse.

Pelosi said her trip showed US solidarity with the China-claimed self-governed island, but China condemned the US visit at its highest level in 25 years as a threat to peace and stability. read more

The offshore Chinese yuan fell 0.09% against the dollar at $6.7780 per dollar.

The Australian dollar fell 1.5% in the wake of the Reserve Bank of Australia’s move to raise interest rates by 50bp to 1.85%, in line with expectations. read more

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Bid prices in currency at 4:30 PM (2030 GMT)

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Reporting by Caroline Valetkevitch; Additional reporting by Saikat Chatterjee in London; Editing by David Holmes, Susan Fenton and Lisa Shumaker

Our Standards: The Thomson Reuters Trust Principles.

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