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U.S. dollar rises on rate-hike speculation
At least three FOMC members said or wrote last Saturday about a need for raising interest rates in the current year.
Lockhart cited slowing growth in China and concern over emerging markets amid falling commodities prices as causes of the volatility.
“The dollar should struggle to gain significant upside traction this week because US interest rate expectations are unlikely to adjust much higher”, said Elias Haddad, a Sydney-based currency strategist at Commonwealth Bank of Australia.
Dennis Lockhart, head of the Atlanta Fed and a member of the policy-setting Federal Open Market Committee, on Monday insisted that a hike was still on the table for this year. But, on the other hand, the Fed said it hopes to raise rates in December.
“As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment”, Lockhart said.
Though still in favor of a rate hike soon, he has now set a new hurdle for the Fed to clear – more certainty that the global risks from China or elsewhere are not restraining the US recovery.
Speaking in an interview with CNBC on Monday, St. Louis Fed President James Bullard espoused how it’s time to hike rates and policymakers at the Fed should refrain from reacting to the volatility in the stock market. But with interest rates still close to zero speculation on gold offers a secure investment and a strong upside potential. The lone dissenting vote on Thursday’s decision was Richmond Fed chief Jeffrey Lacker.
“Yes, October remains a possibility”, she told reporters Thursday. A recent report by the South African Institute of Race Relations found that growing financial pressure on South African consumers could further depress the country’s bleak economic outlook.
Anticipation was high for a possible rate hike last week because September was one of four policymaking meetings this year after which Yellen holds a news conference.
“It was a gloomy end to last week, but a few hints of positivity are seen this morning as investors try to put the Fed’s statement behind them”, said Chris Beauchamp, senior market analyst at IG.
“It seems to us that a data-dependent policy is only credible if you follow it, instead of making detours when the tough decisions are at hand”, he said. The numbers are expected at 10 a.m. ET (1400 GMT).