Dollar Slightly Stronger on Fed Meeting Hopes

By James Ramage 

        The dollar strengthened slightly against the euro and the yen Wednesday ahead of the Federal Reserve's policy statement as investors braced themselves for signals that short-term U.S. interest rates could rise in the coming months.
        The dollar rose 0.4% versus the common currency, as one euro bought $1.1018. The U.S. currency gained 0.3% against the yen to Yen123.93. The Wall Street Journal Dollar Index, which compares the dollar against a basket of 16 widely traded currencies, advanced 0.2% to 88.27.
        The dollar continued along the modest upward trajectory it has taken against developed-market currencies since mid-May as investors wagered that the Fed would raise borrowing costs sometime this year. Some money managers anticipate the Federal Open Market Committee's statement on Wednesday afternoon will emphasize the strengthening U.S. labor market and overall economy, and play down international risks from a slowing China or weak global growth and inflation.
        Fed Chairwoman Janet Yellen has testified recently before Congress that the central bank remains on track to raise rates in 2015, and many investors still believe liftoff could happen as early as September.
        "There is an expectation that the Fed will sound a little bit more hawkish, or signal that a rate hike is coming sometime soon; that's based on some of Chair Yellen's recent comments," said Sireen Harajli, foreign exchange strategist at Mizuho Bank.
        Higher U.S. rates would boost returns on assets denominated in dollars, making the currency more attractive. The dollar has traded in ranges against the euro and the yen generally since mid-March as market uncertainty over the Fed's timing has increased.
        "There's really no consensus across markets on Fed timing," said Mark McCormick, currency strategist at Credit Agricole. "That's likely to lead to choppy markets, with a slightly broader [strengthening] in the dollar. We still need the Fed to send some signals to suggest it's ready to hike rates at the next meeting."
        Write to James Ramage at james.ramage@wsj.com
        (END) Dow Jones Newswires

        July 29, 2015 12:30 ET (16:30 GMT)

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