Dollar Hits Eight-Day High on Strong US Data

The US dollar held near an eight-day high on Thursday after strong US economic data lifted expectations of a Federal Reserve rate hike. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.21 per cent to 99.13, its highest level since August 19.

The Commerce Department reported that the Personal Consumption Expenditures Price Index increased 3.7 per cent in the 12 months through July, slightly above economists' estimates of 3.6 per cent. This kept market expectations for a Fed rate hike by year-end alive, but Chairman Kevin Warsh's upcoming speech at Jackson Hole will be the ultimate test.

The speech and press conference by one of the Bank of Japan's two deputy governors, Ryozo Himino, is also being closely watched. Markets are looking for clues on the likelihood of a September rate hike and the size and scope of any tightening path thereafter. If similar wording to a previous speech is used, it could signal a strong possibility of a rate hike at the September meeting.