The U.S. dollar advanced against its key counterparts on Wednesday, as the Federal Reserve Chair Janet Yellen said that it is appropriate to raise rates later this year, as the economy is expected to strengthen over the course of time and the jobless rate is seen declining gradually.
“If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal-funds rate target, thereby beginning to normalize the stance of monetary policy,” according to a prepared text of Yellen’s semiannual testimony to Congress.
“Looking forward, prospects are favorable for further improvement in the U.S. labor market and the economy more broadly,” Yellen said.
Yellen will deliver the remarks and take her customary grilling from Republicans starting at 10 am ET.
The Labor Department released a report showing that U.S. producer prices rose slightly more than expected in the month of June, driven by a pick up in energy prices
The producer price index rose by 0.4 percent in June following a 0.5 percent increase in May. Economists had expected prices to climb by 0.3 percent.
According to a report released by the Federal Reserve, the U.S. industrial production rose slightly more than expected in the month of June, with the increase reflecting jumps in mining and utilities output.
The industrial production increased by 0.3 percent in June after edging down by 0.2 percent in May. Economists had expected production to rise by 0.2 percent.
On Tuesday, the greenback weakened initially after weak retail sales and import & export price reports, but change path over the course of session.
In the Asian session, the greenback exhibited mixed trading against its major rivals. While the greenback rose against the yen and the euro, it held steady against the franc. Against the pound, the currency was lower.
In European deals, the greenback edged up to 0.9501 against the Swiss franc, off early low of 0.9441. The next possible resistance for the greenback may be located around the 0.96 area.
The greenback spiked up to an 8-day high of 1.0954 against the European currency, up by 0.73 percent from an early low of 1.1035. The greenback is seen finding resistance around the 1.08 region.
The greenback hit 123.82 against the yen, its strongest since June 26. At Tuesday’s close, the pair was worth 123.38. Next key resistance for the greenback is likely seen around the 125.00 region.
The Bank of Japan decided to keep its record monetary stimulus unchanged despite downgrading both inflation and economic growth outlook.
The Policy Board of the BoJ governed by Haruhiko Kuroda decided by an 8-1 majority vote to maintain its target of raising the monetary base at an annual pace of about JPY 80 trillion.
The greenback, having fallen to a 2-week low of 1.5674 against the pound at 3:00 am ET, reversed direction with the pair trading at 1.5601. Further uptrend may lead the greenback to a resistance surrounding the 1.55 mark.
The greenback was trading higher at 1.2783 against the loonie, 0.6670 against the kiwi and 0.7438 against the aussie, reversing from early lows of 1.2722 and 0.6722, and a 5-day low of 0.7488, respectively. If the greenback extends uptrend, it may locate resistance around 1.30 against the loonie, 0.65 against the kiwi and 0.73 against the aussie.
Looking ahead, the Bank of Canada will announce its interest rate decision at 10:00 am ET. The bank is forecast to slash interest rate to 0.50 percent from the present 0.75 percent.
At 12:25 pm ET, Federal Reserve Bank of Cleveland President Loretta Mester will deliver a speech on the economic outlook and participates in a live interview before the Columbus Metropolitan Club Forum in Columbus U.S.
At 2:00 pm ET, Federal Reserve will release the Beige Book of economic conditions.
After an hour, Federal Reserve Bank of San Francisco President John Williams is expected to speak about the economic outlook at the Mesa Chamber of Commerce in Phoenix, Arizona.
The material has been provided by InstaForex Company – www.instaforex.com