US dollar rises to 11-month high

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New York - The dollar reached an 11-month high against the euro after Federal Reserve Chair Janet Yellen cited jobs gains made during the five years of economic recovery while noting slack remains in the U.S. labor market.

The U.S. currency rose to the highest level since February against its major peers amid speculation the Fed will raise interest rates next year. The Canadian dollar fell to an almost four-month low after a government report showed the inflation rate slowed for the first time in five months. The yen gained earlier after a Russian aid convoy crossed the border into Ukraine, which said it hadn’t consented to the move.

“People are buying dollar on the fact that we’ve now passed the event risk of Yellen’s speech,” said Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. “It wasn’t overly hawkish, it seems status quo for now. At the same time, she didn’t try to quell early-rate-hike expectation.”

The U.S. dollar gained 0.3 percent to $1.3237 per euro at 10:47 a.m. in New York, after appreciating to $1.3228, the strongest level since Sept. 9. The greenback added 0.3 percent to 104.14 yen after advancing to 104.18, the highest since Jan. 23. The euro fell 0.1 percent to 137.78 yen.

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, increased 0.2 percent to 1,029.65, touching the highest level since Feb. 4.

CANADA INFLATION

Canada’s consumer price index rose 2.1 percent in July from a year ago following June’s 2.4 percent pace, Statistics Canada said today. Economists surveyed by Bloomberg News forecast a 2.2 percent pace, according to the median of 20 responses.

“Initially we had a weakening in the Canadian dollar as everyone’s eyes went to CPI, which was softer than expected, so that provides some more leeway for the Bank of Canada to maintain its neutral tone,” said Camilla Sutton, head of currency strategy at Bank of Nova Scotia, by telephone from Toronto.

The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, fell 0.2 percent to C$1.0959 per U.S. dollar. The currency weakened to as low as C$1.0980, approaching the low of C1.0986 reached on Aug. 6, the least since May.

“The economy has made considerable progress in recovering from the largest and most sustained loss of employment” since the Great Depression, Yellen said in a speech at the Kansas City Fed’s annual economics conference in Jackson Hole, Wyoming. Even so, she underscored the Federal Open Market Committee statement last month that “underutilization of labor resources still remains significant.”

FED VIEW

Yellen’s remarks appeared in line with the message from minutes of the July FOMC meeting, which showed officials growing more aware that labor markets are approaching full employment. She has said the central bank has no “mechanical answer” for when to raise rates, and that before doing so policy makers must be certain the economy is on a solid footing.

Futures traders saw about a 54 percent chance the Fed will raise its key interest rate to at least 0.5 percent by July, according to data compiled by Bloomberg. The central bank has kept its benchmark rate at almost zero since December 2008.

The dollar has strengthened 1.7 percent in the past month, the best performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes after Norway’s krone. The euro fell 0.3 percent and the yen declined 1.2 percent.

Russia is invading under the cover of the aid trucks, said Valentyn Nalyvaychenko, the head of Ukraine’s security council, according to the Interfax news service. More than 150 trucks entered the country through a border checkpoint in a rebel-held area. Ukraine allowed the convoy to enter to avoid provocations after failing to discuss its safety with the Russian side, the Ukrainian Foreign Ministry in Kiev said in a statement.

Bloomberg


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