Dollar Rises as Focus Returns to Rates

Dollar Rises as Focus Returns to Rates - WSJ

Dollar Rises as Focus Returns to Rates - WSJ

Investors more optimistic of June Fed rate rise

By Chelsey Dulaney

The dollar rose broadly Tuesday as investors assessed the outlook for higher U.S. interest rates.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.4% to 90.52. The dollar rose against the Japanese yen and many emerging-market currencies.

Investors have grown more optimistic that the Federal Reserve will it its meeting next month.

Federal Reserve Bank of Kansas City President Esther George said Tuesday the U.S. central bank should press forward with interest-rate increases, warning that the economy might overheat if borrowing costs aren’t increased quickly enough.

Fed-funds futures, used by investors to bet on the U.S. interest-rate outlook, show a 88% chance that the Fed raises rates at its next meeting in June, according to CME Group data. That is up from 67.5% a week ago.

Higher rates typically support the dollar by making U.S. assets more attractive to yield-seeking investors.

Friday’s U.S. jobs report, which showed , supports the Fed’s case for raising interest-rates at a steady pace, analysts said. Important retail sales and inflation data later in the week will also offer clues on the health of the economy.

The strong economic outlook has helped to revive the dollar, which has been weighed since the start of the year by uncertainty over President Donald Trump’s economic policies.

“The U.S. dollar is slowly shaking off concerns around the ‘Trump trade’ and French election concerns,” said Brad Bechtel, a currency strategist at Jefferies Group. “We passed the maximum point of pessimism on Trump’s ability to deliver…which opens up more focus on the Fed.”

Geopolitical tensions weighed on several emerging-market currencies. The Turkish lira slid 1% against the dollar after Mr. Trump approved plans to directly arm Kurdish fighters battling Islamic State in Syria, angering Turkish allies who view the Kurdish fighters as terrorists.

The South Korean won fell 0.5% against the dollar after North Korea’s ambassador indicated in an interview that the nation would conduct another nuclear test. North Korea’s nuclear tests have rattled neighboring South Korea and raised tensions with the U.S.

Meanwhile, the euro slipped 0.4% against the dollar, extending its slide after the weekend’s prompted investors to take profits.
Chelsey Dulaney

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