Investors now see 50% chance of Fed hike in July

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Investors now see 50% chance of Fed hike in July

Traders now see 50% chance of Fed hike by July next year.

Improving US yields keep pressure on yen.

On Wednesday, the dollar was near a one-year low versus major peers amid rising expectations that the Federal Reserve will announce a tapering of stimulus next month, potentially following interest rate hikes by mid-2022.

Three Fed policymakers said overnight that the U.S. economy has healed enough to begin to scale back the central bank's asset-purchase programme, including Vice Chair Richard Clarida.

Money markets now aspire to price by July about a 50 - 50 chance of rate increase by August.

The Dollar index, which measures the greenback against six rivals, eased from Tuesday to 94.460 when it hit 94.563 for the first time since early September 2020.

A surge in energy prices fuelled inflation concerns and stoked bets that Fed may need to move faster to normalise policy than officials projected, sending two-year Treasury yields to their highest in more than 18 months overnight.

Higher U.S. yields helped push the dollar to a three-year high against the yen on Tuesday at 113.785 yen The pair last traded at 113.485.

The euro changed hands at $1.1541, not far from the previous session's $1.1522, its lowest in nearly 15 - month months.

Traders will focus on consumer price data later on Wednesday for further insight into the timing of higher rates.

CPI is the main economic draw and has the potential to see Fed rate hike expectations grow again, one way or another, said Ray Attrill, head of foreign exchange strategy at National Australia BankAustralia Bank in Sydney.

Most Fed policymakers continue to say inflation pressures will be transitory.

Governors Michelle Bowman and Lael Brainard are among Fed officials due to speak later Wednesday, when the minutes of the September meeting of the central bank are also due to be released.

Sterling left the middle of this month's range trading modestly changed at $1.3596 since Tuesday.

The risk-sensitive Aussie dollar slipped 0.2% to $0.7335, retreating from Wednesday's $1.7384 high of the previous month.

Bitcoin traded around $56,500, after reaching a five-month high of $57,855, after rising to $56,500 today.