- Fed's Clarida cites importance of economic data
- Trump expects to raise tariffs on Chinese imports
(Adds quotes, updates prices)
The U.S. dollar hit two-week highs on Tuesday after Federal Reserve Vice Chair Richard Clarida backed further interest rate hikes, taking a less dovish stance than some investors had anticipated.
Clarida noted the importance of monitoring economic data as the U.S. central bank approached a neutral stance and stressed how difficult it was for the Fed to determine both the neutral interest rate and the maximum level of unemployment.
“I think the market went into that looking for something a bit more dovish,” said Richard Franulovich, head of FX strategy at Westpac Banking Corp in New York.
“His first comments as vice chair a couple of weeks ago saw the dollar fall notably...he cast himself as sort of a cautious vice chair. Today was a bit more even-handed,” Franulovich said.
Clarida said on Nov. 16 that U.S. interest rates are nearing Fed estimates of a neutral rate, and being at neutral "makes sense."
The dollar index against a basket of currencies rose .DXY as high as 97.497, the highest since Nov. 13.
A speech by Fed Chairman Jerome Powell on Wednesday and minutes from the Fed’s Nov. 7-8 meeting on Thursday will be evaluated for further indications of how many more times the U.S. central bank is likely to hike interest rates.
Powell said last month the Fed may raise interest rates above an estimated neutral setting as the "remarkably positive" U.S. economy continues to grow.
“The Powell speech on the overshoot of neutral was construed as a very hawkish delivery,” said Mark McCormick, North American head of FX strategy at TD Securities in Toronto. "The Fed has been gently walking that back since."
Clarida's comments on Tuesday are "reconfirming that the overshooting of the neutral is not a specific goal, but it’s something that they will probably do if the data allows them to do it," McCormick said.
The greenback was also bolstered by concerns about trade tensions with China, after U.S. President Donald Trump said he expects to raise tariffs on $200 billion in Chinese imports to 25 percent from 10 percent currently.
Trump and Chinese President Xi Jinping are scheduled to meet and discuss contentious trade matters at the G20 summit to be held in Buenos Aires on Nov. 30 and Dec. 1.
Sterling was weaker after Trump said the agreement allowing Britain to leave the European Union may make trade between Washington and London more difficult.
======================================================== Currency bid prices at 2:06PM (1906 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1298 $1.1326 -0.25% -5.82% +1.1344 +1.1278 Dollar/Yen JPY= 113.7700 113.5900 +0.16% +0.98% +113.8400 +113.4200 Euro/Yen EURJPY= 128.52 128.65 -0.10% -4.93% +128.8300 +128.3600 Dollar/Swiss CHF= 0.9983 0.9983 +0.00% +2.46% +1.0003 +0.9976 Sterling/Dollar GBP= 1.2737 1.2833 -0.75% -5.74% +1.2834 +1.2726 Dollar/Canadian CAD= 1.3298 1.3250 +0.36% +5.73% +1.3328 +1.3235 Australian/Doll AUD= 0.7219 0.7220 -0.01% -7.46% +0.7269 +0.7200 arEuro/Swiss EURCHF= 1.1279 1.1309 -0.27% -3.51% +1.1324 +1.1276 Euro/Sterling EURGBP= 0.8867 0.8843 +0.27% -0.18% +0.8887 +0.8829 NZ NZD= 0.6788 0.6768 +0.30% -4.21% +0.6810 +0.6754 Dollar/DollarDollar/Norway NOK= 8.6060 8.5865 +0.23% +4.86% +8.6377 +8.5760 Euro/Norway EURNOK= 9.7260 9.7267 -0.01% -1.24% +9.7469 +9.7089 Dollar/Sweden SEK= 9.0959 9.0928 -0.20% +10.90% +9.1195 +9.0710 Euro/Sweden EURSEK= 10.2803 10.3008 -0.20% +4.48% +10.3057 +10.2620
