As the speculation over the Federal Reserve moving towards raising interest rates looms large, the US dollar strengthened to a nine-month high against the euro.
Meanwhile, the Fed will today release the minutes of its policy meeting held last month. Ahead of the release, the greenback reported at a six-month high against major currencies. The New Zealand dollar dropped to the lowest level in eight months against the Australian currency.
Seeing the strengthening US dollar, Goldman Sachs Group Inc. said that the currency is expected to improve its prospects further as the money continues to flow out of Europe.
“Currency markets may be pricing in an earlier than expected interest rate rise by the Fed ahead of the minutes. The dollar continues to be bought,” Masato Yanagiya, head of foreign exchange and money trading at Sumitomo Mitsui Banking Corp. in New York. It is a unit of second-biggest Japanese financial group by market value.
The greenback bought USD 1.3305 per euro at 12:43 pm in Tokyo from Monday’s USD 1.3320 after earlier touching the strongest level, USD 1.3303, since November 7.
The dollar advanced further 0.3 percent to 103.22 yen. It rose to USD 1.6605 against the pound which is the highest level since April 8. Meanwhile, the 18-nation euro gained 0.2 percent to 137.30 yen.
The Bloomberg Dollar Spot Index advanced 0.1 percent to 1,024.89. The index keeps track of the American currency against its ten major counterparts. The index had touched the highest level to 1,024.97 since February 10.
Writing for a research note dated August 19, Goldman Sachs analysts including Chief Currency Strategist Robin Brooks says, “European Central Bank easing is driving more Euro zone residents to search for yield abroad. The picture is supportive of further EUR versus USD downside.”
Last month, the monthly bond purchases were lowered by USD 10 billion to USD 25 billion for a sixth consecutive Fed meeting.
Janet Yellen is set to chair a the three-day meeting of central bankers and economists beginning tomorrow. The main focus of the meeting will be on the labor market. Yellen and ECB President Mario Draghi are scheduled to deliver a speech at the annual symposium in Jackson Hole, Wyoming.