Dollar Rises Against Euro, Yen

By James Ramage 

        The dollar rose against the euro and the yen Tuesday after Federal Reserve Bank of Atlanta President Dennis Lockhart raised market expectations for higher borrowing costs in the coming months.
        Mr. Lockhart, a voting member on the Fed's monetary-policy committee, told The Wall Street Journal that only a "significant deterioration in the economic picture" would keep him from voting for the central bank to raise short-term U.S. interest rates for the first time since 2006. The message sparked dollar-buying Tuesday afternoon.
        Investors regard Mr. Lockhart as a centrist among Fed officials, so his words sent a strong signal that the Fed is moving closer to raising interest rates at its September meeting.
        The dollar, which had moved little throughout Tuesday's session, increased 0.6% against the common currency. One euro bought $1.0891 in late-afternoon trade, on track to close at a two-week low. The dollar rose 0.2% versus the yen, to Yen124.28, heading for its strongest closing value since July 20.
        Following Mr. Lockhart's comments, the U.S. two-year bond yield rose to 0.728%, its third highest closing this year. Bond yields rise as their prices fall. The rise in the U.S. two-year yield, in turn, pushed the dollar higher, said Brad Bechtel, managing director at Jefferies FX Group.
        "It's pretty clear [Mr. Lockhart] is angling for a September move, unless something drastic happens with U.S. data," Mr. Bechtel said. "This was a positive for the dollar. Any data point in the U.S. will sway prices in the front end of the yield curve, and that's going to drive the dollar."
        Investors had pushed the dollar to multiyear highs against other developed-market currencies earlier this year in the belief that the Fed would be the first major central bank to raise interest rates. Higher U.S. borrowing costs would draw yield-hungry investors to the greenback.
        Next, investors anticipate that a strong U.S. jobs report for July, which will be released Friday, will move the Fed ever closer to raising interest rates from near zero. Mr. Lockhart mentioned that U.S. employment data have generated "positive signals." Economists forecast that the U.S. added 215,000 jobs last month.
        (END) Dow Jones Newswires

        August 04, 2015 16:21 ET (20:21 GMT)

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