Dollar prices up after Trump as Fed March hike in sight

U.S. dollar spurted higher in Asian trade on Wednesday as Federal Reserve policy-setters fanned expectations of a rate hike this month, overshadowing a key speech by U.S. President Donald Trump that offered little details on his stimulus.

The greenback traded at 113.16 yen, up 0.35 percent from late U.S. levels, while the euro dropped 0.1 percent against the dollar to $1.0565.

The dollar index, which measures the greenback against a basket of six major peers was last up 0.1 percent at 101.45.

In a long-awaited speech to the Congress, Trump opened the door to a broad overhaul of the U.S. immigration system and vowed to pursue massive tax relief for the middle class but stopped short of giving any details.

“There was no mention of the size and the schedule of his tax cuts and spending. He just repeated what he had said,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

“So the dollar would have been sold on disappointment but in reality a barrage of comments from the Fed this morning overwhelmed that,” he further added.

Earlier, the U.S currency had risen after a handful of Federal Reserve policymakers boosted expectations for a March interest rate increase.

New York Fed President William Dudley, among the most influential U.S. central bankers, said that the case for tightening monetary policy has become a lot more compelling.

John Williams, President of the San Francisco Fed, said that a rate increase was very much on the table for serious consideration at the March meeting given full employment and accelerating inflation.

Money market futures were now pricing in about a 70 percent chance of a rate hike in March, compared to about a 30 percent or less at the start of the week.

U.S. economic data released on Tuesday showed a moderate growth path, as the U.S. economy expanded at a slower pace in the fourth quarter, in line with last month’s estimate.

The Australian dollar showed muted response to a private survey showing China’s factory activity expanding at a faster pace than expected in February.

The Aussie traded at $0.7666, up 0.2 percent on the day.

The Mexican peso, seen as the most vulnerable to Trump’s protectionist policies and harsh rhetoric, also took his speech in stride. The peso was little changed at 20.097 per dollar.

Some analysts said Trump’s speech, while lacking details on economic policies, did seem positive after a turbulent month in office.

“Today was a ‘good Trump’, compared to the aggressive bad Trump shown on Twitter,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank.

“He did not attack the media and addressed education. Even his tie was navy, not a furious red,” Sera concluded.

Source: Reuters