Dollar near two-month high, investors eye intervention-zone yen

By Hannah Lang

WASHINGTON (Reuters) – The dollar index hovered near a two-month high on Thursday after Federal Reserve meeting minutes left the door open for more rate hikes and data this week indicated a resilient U.S. economy.

Investors continue to closely watch the Japanese yen, which touched the key 145 level for the first time in about nine months last Friday, crossing into a zone that sparked an intervention by Japanese authorities in September and October last year.

The U.S. dollar index was 0.097% higher on the day at 103.56, after hitting a two-month high of 103.59.

The greenback has drawn support from a recent run of U.S. economic data reinforcing the view that interest rates will remain high for some time.

Data on Wednesday showed that U.S. single-family home building surged in July and permits for future construction rose, while a separate report said production at U.S. factories unexpectedly rebounded last month.

Minutes of the Fed’s July policy meeting showed officials were divided over the need for more rate hikes last month, citing the risks to the economy if rates were pushed too far.

“When you come back to the Fed minutes, there is a case for the Fed to hike again in November, but I don’t think the market wants to trade around November just yet,” said Adam Button, chief currency analyst at ForexLive. “There’s so much data between then and now.”

Elsewhere, the yen edged 0.12% higher to 146.14 after weakening to 146.56 per dollar, its lowest level since November, having come under renewed pressure as a result of interest rate differentials between the U.S. and Japan’s ultra-low rate environment.

The Bank of Japan is “reluctant to intervene right now, but I think at some point we’re going to reach the uncle point on dollar-yen, and I think if it’s not right now, it’s definitely going to be at 150,” said Kathy Lien, managing editor of 60 Second Investor.

DATA DEPENDENT

The Australian dollar was lower after earlier sinking to a nine-month low, taking its New Zealand counterpart along with it, on data showing that Australia’s employment unexpectedly fell in July while the jobless rate ticked higher.

The Australian dollar was last 0.44% lower at $0.64, having tumbled more than 0.9% to a trough of $0.6365 following the employment data release. The kiwi fell 0.24% to $0.592 after touching its lowest level since November.

The two Antipodean currencies, often used as liquid proxies for the yuan, have also taken a beating over the past few sessions as a result of the darkening outlook over China’s economy.

The Norwegian crown rose from six-week lows against the dollar and the euro on Thursday after Norges Bank raised interest rates, as expected, and said it was likely to hike again in September.

Against the dollar, the Norwegian crown was last up 0.22% to 10.60, having hit 10.66 earlier in the session.

The euro was down 0.2% to $1.08565. Sterling was last trading at $1.27275, up 0.04% on the day, after surging on Wednesday on British inflation data.

Despite a sharp drop in Britain’s headline inflation rate, key measures of price growth monitored by the Bank of England (BoE) failed to ease in July, boosting bets the BoE will keep rates higher for longer.