Dollar Edges Higher On Rate Hopes

By James Ramage 

        The dollar edged higher against the euro and the yen on Wednesday as investors moved back into bets that the U.S. currency will strengthen when the Federal Reserve raises borrowing costs.
        The dollar rose 0.5% versus the common currency, as one euro bought $1.0885, and ticked 0.2% higher against the yen to Yen124.09.
        The Wall Street Journal Dollar Index, which compares the dollar with a basket of 16 widely traded currencies, rose 0.4% to 88.49, roughly 0.9% away from the 12-year high it reached on March 13.
        Light trading on little U.S. data continued to hold the dollar to tight trading ranges against peers, said Fabian Eliasson, head of U.S. currency sales at Mizuho Bank. Investors are wagering that stronger U.S. economic data will move the Fed to raise interest rates from near zero before the end of the year, and possibly as early as September.
        Higher U.S. rates would increase returns on dollar-denominated investments, boosting the currency's allure.
        "People may be re-entering their positions on the dollar today," Mr. Eliasson said. "The general consensus is that the dollar will strengthen, particularly as we get closer to the Fed raising interest rates."
        The dollar got a small lift after sales of previously owned homes increased 3.2% last month from May to a seasonally adjusted rate of 5.49 million, the National Association of Realtors said Wednesday. Economists had forecast that June sales would tick up 0.9% to a pace of 5.4 million.
        In other trade, the New Zealand dollar declined against the dollar and the yen as investors position themselves ahead of a meeting of the country's reserve bank. Most investors expect the central bank will trim its cash rate by a quarter of a % to 3.00%, but some predict a half-percent cut.
        The New Zealand dollar slid 0.8% to US$0.6570, just above a six-year low. Against the yen, the New Zealand dollar dropped 0.7% to Yen81.50.
        Write to James Ramage at James.Ramage@wsj.com
        (END) Dow Jones Newswires

        July 22, 2015 12:24 ET (16:24 GMT)

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