By REUTERS
The dollar rose on Tuesday as a top US Federal Reserve official voiced support for an interest rate increase in September despite a batch of disappointing data on wages and manufacturing activity.
Atlanta Fed President Dennis Lockhart told the Wall Street Journal said it would take “significant deterioration” in the US economy for him to not support a rate hike in September.
Lockhart is a voter this year on the Federal Open Market Committee, the Fed’s policy-setting group. He has a reputation as a centrist and has sided with Fed Chair Janet Yellen on her policy stance.
“He is seen as a swing vote and he has become increasingly hawkish,” said Ian Gordon, G10 currency strategist at Bank of America Merrill Lynch in New York.
Lockhart’s remarks jolted the dollar, which had been stuck in a narrow range against mostcurrencies and whose earlier losses had boosted currencies closely linked to commodities.
The dollar index was up 0.5% at 97.957, wiping out earlier losses.
The greenback rose 0.3% on the day to 124.33 Japanese yen, while the euro fell 0.6% at US$1.0883.
A record small rise in second-quarter US wages posted on Friday and a surprise fall in a private measure of domestic manufacturing activity on Monday had raised doubts about a possible Fed interest rate hike in September.
Bets that the Fed would delay a hike had hurt the greenback and stabilized the currencies of oil and other commodity exporters like Canada.
The Canadian dollar fell to its lowest since August 2004. It last traded at C$1.3182 per US dollar.
Commodities markets had weakened on worries about excess supply and falling demand from China.
Brent crude prices in London hit a six-month low before recovering 1% at US$49.99 a barrel, while benchmark copper prices was up 0.35%.
The Australian dollar jumped after that country’s central bank, in a policy statement, dropped a long-used reference about a further decline of the Aussie being necessary to support the economy. Analysts cautioned that the Aussie’s long-term prospects remain weak.
“I wouldn’t rush out to declare the four-year downtrend in the Aussie against the dollar over, but it’s not the most attractive short looking forwards,” said Kit Juckes, a strategist with Societe Generale in London.
The Aussie was up 1.3% at US$0.7382, recovering further from a six-year trough of US$0.7234 set last week.
— by Richard Leong
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