Dollar rises on Fed rate hike expectation: Oct 12, 2016

Market Review - 11/10/2016  22:57GMT 

Dollar rises on Fed rate hike expectation

The greenback rose against majority of its peers on Tuesday on increasing speculation that the Federal Reserve will hike its interest rate once more before the end of the year. 

Versus the Japanese yen, dollar gained at Asian open and ratcheted higher to session high at 104.07 at European open. However, price pared its gains and dropped to an intra-day low at 103.18 in New York midday on broad-based buying of yen. 

The single currency remained under pressure in Asia and continued to ratchet lower on dollar's broad-based strength. Euro tumbled to 1.1071 ahead of New York open before staging a recovery, however, renewed selling at 1.1099 pressured the pair lower and price hit an intra-day low at 1.1049. 

The British pound also remained under pressure in Asia and dropped to 1.2250 in European morning before staging a short-covering rebound to 1.2329 in New York morning. However, renewed selling there pressured the pair lower and cable hit an intra-day low at 1.2090. 

In other news, BoE's Saunders said 'expects MPC to largely look through direct effects on inflation of sterling weakness, even if they extend for several years; dilemma for MPC would be much sharper if inflation expectations and pay growth were to pick up significantly; experience of recent decades makes it clear that episodes of rapid debt growth can subsequently destabilize UK economy; QE has been helpful in providing modest extra stimulus to the UK over recent years; most likely outcome is that EU exit will result in slightly lower potential growth in the long term; he is somewhat more optimistic about the growth outlook than the consensus for the next year or so; even with a slowdown in growth, I currently doubt that slack across the economy will rise significantly in the year ahead; would expect the MPC to tolerate a modest currency-driven inflation overshoot in the next 2-3 years; given the scale and persistence of uk current account deficit, I would not be surprised if sterling falls further.' 

On the data front, the ZEW Centre for Economic Research said that its index of German economic sentiment rose to 6.2 this month from September's reading of 0.5. Analysts had expected the index to increase to 4.3 in October. 

Data to be released on Wednesday: 

Japan machinery orders, Australia consumer confidence, France CPI, Swiss ZEW survey, Eurozone industrial production, U.S. MBA mortgage applications and JOLTS jobs opening.