(Reuters) – TOKYO, July 14 (Reuters) – The dollar rose to a three-month high against the euro and a one-week high against the yen on Wednesday, fueled by expectations of faster monetary policy tightening than the Federal Reserve has signaled thus far. The New Zealand currency soared over 1% to 70.235 US cents after the Reserve Bank of New Zealand announced on Wednesday that it would end its large-scale asset-purchase program, clearing the way for a rate hike this year. “In a world where central bank divergence matters, the RBNZ has just stuck their head over the cliff and given traders permission to buy the NZD,” Chris Weston, head of research at broker Pepperstone, wrote to clients in a note. For the first time since November, the kiwi fell below 69.18 cents on Tuesday. find out more For the second day in a row, the dollar rose to $1.17720 per euro, its highest level since April 5, before falling 0.1 percent to $1.17860. It climbed above 110.70 yen for the first time since July 7 before retracing 0.1 percent to 110.50 yen. In a research note, Tapas Strickland, an analyst at National Australia Bank, said, “Another hotter-than-expected U.S. CPI print has got the market wondering if the rise in inflation would prove to be transient or more durable.” “Markets have aligned with the hawkish interpretation, pushing rate hike expectations forward to late 2022,” according to the paper, resulting in “broad-based gains” for the currency. The dollar index, which compares the US currency to a basket of six other currencies, fell 0.1 percent to 92.705 after surging as high as 92.832 earlier in the day, barely below the 92.844 level achieved last week for the first time since April 5. As the economic recovery gained traction, consumer prices in the United States climbed to their highest level in 13 years in June, owing to supply limitations and a further rebound in the costs of travel-related services from pandemic-low levels. find out more Traders are now anticipating Fed Chair Jerome Powell’s testimony before Congress on Wednesday and Thursday for any clues on when the stimulus will be tapered and interest rates will rise. Powell has stressed repeatedly that rising inflation is just temporary, and that supply chains will normalize and adapt. find out more In other news, the Canadian dollar rose 0.1 percent to C$1.2503, staying near to a two-and-a-half-month low of C$1.2590 recorded last week after its worst weekly drop on Tuesday. At a policy announcement later on Wednesday, the Bank of Canada is likely to update its economic predictions, with further asset purchases expected to be tapered. find out more The Australian dollar, which is typically seen as a proxy for risk appetite, rose 0.2 percent to 74.60 US cents, boosted by kiwi advances. Sterling gained 0.1 percent to $1.38245, reversing a 0.5 percent loss on Tuesday. ======================================================== At 0601 GMT, currency bid prices were as follows: Each and every location Locations in Tokyo Locations in Europe Volatilities BOJ provides information on the Tokyo foreign exchange market. Kevin Buckland contributed reporting, while Jacqueline Wong and Stephen Coates edited the piece. The Thomson Reuters Trust Principles are our standards./n
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