The US dollar extended an advance on Friday, as US Treasuries fell after US Federal Reserve Chair Janet Yellen said an interest-rate increase in the coming months might be appropriate, echoing recent remarks by policymakers.
Yellen, speaking at Harvard University, stopped short of giving an explicit hint that the Fed would act next month. The greenback strengthened versus almost all major peers on Friday, while Britain’s pound gained for a second week on increasing confidence the UK would remain in the EU.
Yellen’s comments come after a string of central bank officials signaled their willingness to tighten policy as soon as next month. Strengthening US economic reports, including data on Friday showing that GDP expanded faster than previously estimated in the first quarter, have supported the argument that the nation could withstand another hike.
“Yellen had sent out her crew to telegraph this before today [Friday]. It’s confirmation more than anything — we had all heard from various speakers for a week now that the tone of the FOMC [Federal Open Market Committee] members was not particularly dovish,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co in Milwaukee. “Yellen comes out today and the writing was on the wall and she etched it in with a pen.”
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, climbed 0.5 percent, halting a two-day drop.
The MSCI Emerging Markets Currency Index advanced this week, snapping a run of three weekly losses. Argentina’s peso, Russia’s ruble and South Korea’s won led the advance, climbing more than 0.9 percent in the period.
In Taipei, the US dollar fell against the New Taiwan dollar on Friday, shedding NT$0.048 to close at NT$32.528 as foreign investors continued to move funds into the country, dealers said. The US dollar also slid 0.7 percent from NT$32.752 the previous week.
Seasonal fund demand from Taiwanese exporters as the current month comes to a close also pushed the US dollar to its lowest level since May 9, when it closed at NT$32.417, they said.
A move by the People’s Bank of China to raise the yuan’s reference rate against the US dollar was also felt on Taipei’s foreign exchange market. It led traders in the region to buy into major regional currencies, which boosted the strength of the won, which the NT dollar tracks closely, and pushed the local currency higher, dealers said.
The currencies of oil-exporting nations pared their weekly advance on Friday as oil retreated. The Canadian dollar, Norwegian krone, Brazil’s real and the ruble weakened at least 0.5 percent.
The pound rose 0.7 percent this week versus the US dollar, the second-biggest gain among 16 major peers. A poll by former Conservative MP Michael Ashcroft showed almost 65 percent of voters believe the UK would remain in the EU after a June 23 referendum.
The pound has been gathering supporters. One month ago, the UK currency was seen ending next month at US$1.42, according to the median of analyst estimates in a Bloomberg survey. That forecast has now risen to US$1.45, the highest in almost four months, even as the referendum date draws closer.
Sterling has been the best performer among its G10 peers in the past two weeks and has climbed from a seven-year low in February.
“There is still room for recovery in the pound,” said Thu Lan Nguyen, a currency strategist at Commerzbank AG in Frankfurt.
Sterling would be supported “if the market continues to price in that the UK will vote to stay in the EU, but it is a fragile state,” she said.
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