LONDON: The dollar extended gains against the yen and euro on Wednesday after Atlanta Federal Reserve President Dennis Lockhart expressed support for an interest rate hike in September.
The dollar nudged up 0.1 percent to 124.46 yen JPY= after pulling away from an overnight low of 123.80. The euro slid to a two-week low of $1.0847 EUR=.
Lockhart, a voter this year on the Federal Open Market Committee, told the Wall Street Journal that it would take “significant deterioration” in the U.S. economy for him to not support a rate hike in September.
“Lockhart was not scheduled to speak until Monday (10 Aug), so the hawkishness of the comments, and the timing of the interview is surprising,” wrote Richard Cochinos, head of Americas G10 FX strategy at Citi in New York.
After three days of sharp declines, U.S. Treasury yields jumped on Lockhart’s comments and supported the dollar.
The dollar index .DXY rose as high as 98.218, highest since late April.
While the Atlanta Fed president’s views strengthened the case for some dollar bulls, the odds of a September hike are still seen hinging on Friday’s U.S. non-farm payrolls data.
Reflecting market caution, the fed funds rate – which enables investors to bet on when rates will rise – still indicates that a hike is unlikely in September.
The Australian dollar saw profit takers chip away at some of its big gains made Tuesday after the Reserve Bank of Australia toned down its call for a weaker currency.
