3 Minutes to Read (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. On Wednesday, the dollar rose to $1.17720 per euro, its highest level since April 5, for the second day in a row, and was last barely changed from Tuesday’s $1.17755. It climbed above 110.70 yen for the first time since July 7, and was last trading at 110.66 yen. The dollar hovered barely below $0.6918 against the New Zealand dollar, which it had achieved for the first time since November on Tuesday. It last traded at $0.6956, essentially unchanged ahead of the Reserve Bank of New Zealand’s policy statement, with economists predicting no changes. 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, remained unchanged at 92.783 after reaching as high as 92.832 earlier in the day, slightly below the 92.844 level touched 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. 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. In other news, the Canadian dollar fell to C$1.25155 per greenback, its lowest level in a week, after falling to a two-and-a-half-month low of C$1.2590 last week. 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. Kevin Buckland contributed reporting, and Jacqueline Wong edited the piece./n
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