Dollar near 8-month highs as U.S. rate hike talk dominates

Dollar near 8-month highs as U.S. rate hike talk dominates  | Dec 02, 2015 11:18

Dollar broadly supported amid growing U.S. rate hike hopes - The dollar hovered close to eight-month highs against the other major currencies on Wednesday, as growing expectations for a December rate hike by the Federal Reserve overshadowed the previous day's downbeat U.S. data.

USD/JPY rose 0.23% to 123.14.

The dollar had weakened after the Institute of Supply Management reported on Tuesday that its manufacturing PMI fell to a six-year low of 48.6 in November from 50.1 the previous month, confounding expectations for a rise to 50.5.

But speculation that the Fed will raise interest rates at its December meeting continued to lend broad support to the greenback.

Investors were eyeing a string of U.S. economic reports this week, including Friday's nonfarm payrolls report for further indications on the strength of the economy, as the Fed has said that any decision on interest rates will depend on data.

EUR/USD dropped 0.41% to 1.0589, re-approaching Monday's seven-month trough of 1.0556.

Eurostat said on Wednesday that the euro zone's consumer price inflation increased by 0.1% last month, missing expectations for a gain of 0.2% and following a 0.1% increase in October.

The rate has now been below 1% for 26 straight months, well under the European Central Bank's target of near but just under 2%.

Sentiment on the euro also remained vulnerable amid signals by the ECB over the past weeks that it is ready to implement additional easing measures in order to boost inflation in the euro zone and support growth.

Elsewhere, the dollar was higher against the pound and the Swiss franc, with GBP/USD down 0.17% at 1.5055 and with USD/CHF adding 0.16% to 1.3370.

Sterling weakened after market research firm Markit and the Chartered Institute of Purchasing & Supply said that their U.K. construction PMI declined to seven-month low of 55.3 last month from a reading of 58.8 in October. Economists had expected the index to fall to 58.2 in November.

The Australian dollar was stronger, with AUD/USD up 0.12% at 0.7329, while NZD/USD edged down 0.16% to 0.6663.

Earlier Wednesday, data showed that Australia's gross domestic product rose 0.9% in the third quarter, beating expectations for a 0.8% increase. Year-on-year, Australia's economy expanded by 2.5% in the last quarter, above expectations for a growth rate of 2.4%.

Meanwhile, USD/CAD held steady at 1.3369.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.26% at 100.13, close to Monday's eight-month peak of 100.35.

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