The US dollar posted a weekly gain against the euro as traders weighed upcoming risks, including next week’s US Federal Reserve meeting and the potential for a UK exit from the EU.
The US currency rose for the fifth time in the past six weeks against the common currency.
A JPMorgan Chase & Co measure of global foreign-exchange volatility surged this week after Fed Chair Janet Yellen called the latest employment report “disappointing,” while polls before the June 23 British vote whipsawed the pound.
“The dollar has room to move higher,” said Ugo Lancioni, London-based head of currency management at Neuberger Berman Group LLC, citing US monetary policy divergence from its biggest peers in Europe, Japan and commodity-exporting nations.
The company, which manages US$243 billion, expects the currency’s recent weakness to subside and has added some bullish short-term positions.
The greenback recouped some of its losses this week after slumping on June 3 when a lackluster US jobs report weakened the case for the Fed to boost borrowing costs.
It rallied last month as policy makers, including Yellen, said higher rates in the coming months looked appropriate.
The US dollar climbed 0.6 percent against the euro to US$1.1251 as of 5pm New York time and added 1 percent this week. The yen rose 0.1 percent to ￥106.97 per US dollar.
The JPMorgan gauge of foreign-exchange price swings has climbed 10 percent this week, the most since February.
Hedge funds and other money managers increased net bullish bets on the US dollar for the third week to 145,247 positions as of Tuesday, according to data from the Commodity Futures Trading Commission. That is up from 84,149 the week earlier.
While traders see a zero percent chance the Fed will raise rates at Wednesday’s meeting, there is a 49 percent probability the central bank will hike by year-end, futures data show.
The Federal Open Market Committee is to end the two-day meeting with a policy statement, revised economic projections and a news conference.
“The foreign-exchange markets have overreacted to the latest Fed cautiousness,”said Valentin Marinov, head of G10 foreign-exchange strategy at Credit Agricole SA in London. “The misvaluation should diminish before long with the US dollar recovering,” particularly against the currencies of raw-material exporters including Canada, Norway and Australia.
Meanwhile, the British pound tumbled the most in almost four months after the latest poll showed the campaign for Britain to leave the EU took a 10 percentage-point lead less than two weeks before the referendum.
The survey of 2,000 people by ORB for the Independent newspaper found 55 percent in favor of a so-called “Brexit,” the biggest “Leave” lead recorded by ORB in polls for the newspaper.
The pound tumbled 1.4 percent to US$1.4259 as of 3:31pm New York time, the most since Feb. 22. It earlier plunged as much as 1.9 percent.
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