- Bullard, Kaplan remarks on tapering, inflation lift dollar
- Dollar gains the most vs Swiss franc in two weeks
- Implied euro-dollar volatility at one-week low
- Graphic: World FX rates https://tmsnrt.rs/2RBWI5E
(Adds market commentary, fresh prices)
The dollar jumped from one-week lows on Thursday after two regional Federal Reserve presidents suggested a faster pace of reducing the U.S. central bank's asset purchases, comments that pushed the greenback toward a key resistance level.
The dollar index =USD , which measures the greenback against a basket of six major trading currencies, traded a bit higher just before the remarks by James Bullard, the president of the St. Louis Fed, who is considered a hawk on policy.
Bullard said in comments to CNBC that he was skeptical that inflation would moderate and for that reason the Fed needed to start tapering its bond-purchasing program.
"We have to get going on taper, get the taper finished by the end of the first quarter of next year. Then we can evaluate inflation, what the situation is," Bullard said.
Dallas Fed President Robert Kaplan said the strength of the U.S. economy still puts the Fed on track to begin reducing its monthly bond purchases in October or soon after.
The dollar index jumped above 93, a key resistance level, to trade 0.27% higher at 93.0361. On Wednesday, the index had dropped to 92.801 for the first time since Aug. 17.
The euro EUR= fell 0.18% to $1.175, while the dollar gained 0.50% to 0.9181 against the Swiss franc CHF=EBS .
Two weeks ago the dollar index rose above 93 and has been testing that level since then as a support level, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC.
The market will likely discount what Bullard said, in part because he is a non-voting member of the Fed's policy-setting committee, but "his voice is heard in the room and you have to assume therefore it does have some impact," Ricchiuto said.
POWELL EYED Bullard and Kaplan's comments came as the Fed's annual Jackson Hole, Wyoming, symposium opened, with the spotlight on Fed Chair Jerome Powell's speech on Friday.
Analysts doubt Powell will offer new hints about when the Fed may start to cut its asset purchases.
Powell will reiterate Kaplan's message last week of being flexible and will have done a good job if the markets don't move when he speaks, said Lee Ferridge, North American head of multi-asset strategy at State Street Global Markets.
"He doesn't want the markets to panic that they're going to taper into a slowing economy," Ferridge said. "He’s going to walk this line of leaving the taper on the table but putting out the idea of flexibility as well."
Benchmark 10-year Treasury note yields US10YT=RR were last at 1.3424%, after reaching 1.375% following Bullard's comments, the highest since Aug. 12.
The yen JPY= slid 0.04% to 110.04. Among commodity currencies, the dollar rose 0.76% to 1.2682 versus the Canadian dollar CAD=D3 and 0.51% to 0.7289 versus the Australian dollar AUD= D.
Currency market swings have eased ahead of Powell's speech, with implied euro-dollar volatility at a one-week low EUR1MO=FN .
Meanwhile, more central banks worldwide are exiting or contemplating exiting from ultra-easy accommodative policies. South Korea's central bank on Thursday raised interest rates for the first time in three years.
The won gave up initial gains, however, to fall 0.6% KRW= after the hike, which had been well-flagged.
Declining oil prices weighed on the Canadian dollar. Brent crude futures LCOc1 settled down $1.18, or 1.63%, at $71.07 a barrel.
The looney has not broken through the 1.25 level with the U.S. dollar because of growth expections, uncertainty over the upcoming election in Canada and a recent decline in commodity prices, State Street Global Markets' Ferridge said.
"It’s caught up in the commodity sell-off we’ve seen of late, the narrative of declining growth expectations - U.S. growth expectations have come down - and the Bank of Canada not being as hawkish," he said.
======================================================== Currency bid prices at 3:50PM (1950 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 93.0610 92.8180 +0.27% 3.423% +93.0790 +92.8070 Euro/Dollar EUR=EBS $1.1750 $1.1772 -0.18% -3.83% +$1.1779 +$1.1746 Dollar/Yen JPY=EBS 110.0400 110.0000 +0.04% +6.50% +110.2200 +109.9250 Euro/Yen EURJPY= 129.31 129.45 -0.11% +1.88% +129.7600 +129.2500 Dollar/Swiss CHF=EBS 0.9181 0.9137 +0.50% +3.79% +0.9192 +0.9136 Sterling/Dollar GBP=D3 $1.3698 $1.3764 -0.48% +0.26% +$1.3767 +$1.3690 Dollar/Canadian CAD=D3 1.2682 1.2590 +0.76% -0.38% +1.2695 +1.2587 Aussie/Dollar AUD=D3 $0.7239 $0.7275 -0.51% -5.91% +$0.7279 +$0.7235 Euro/Swiss EURCHF= 1.0789 1.0754 +0.33% -0.17% +1.0805 +1.0750 Euro/Sterling EURGBP= 0.8578 0.8551 +0.32% -4.02% +0.8584 +0.8551 NZ NZD=D3 $0.6949 $0.6974 -0.36% -3.23% +$0.6976 +$0.6942 Dollar/DollarDollar/Norway NOK=D3 8.8325 8.7980 +0.45% +2.92% +8.8400 +8.8030 Euro/Norway EURNOK= 10.3800 10.3690 +0.11% -0.83% +10.3933 +10.3520 Dollar/Sweden SEK= 8.7101 8.6809 +0.19% +6.27% +8.7293 +8.6777 Euro/Sweden EURSEK= 10.2357 10.2166 +0.19% +1.58% +10.2548 +10.2221 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5EBank of Korea's policy interest rate https://tmsnrt.rs/38fwwry
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