The greenback hit a three-week high against the yen on Tuesday following comments from the New York Fed President William Dudley. Dudley spoke to small business owners on Monday signaling confidence in the economy and suggesting that inflation will rise thanks to a tightening labor market.
The comment gave investors hope that the Fed will continue raising interest rates this year.
Investors feared that low inflation would remain and could prevent the Fed from raising the interest rates again in 2017. Chicago’s Fed President Charles Evans also commented on the matter on Monday suggesting that the Fed may want to wait until the end of the year to consider raising interest rates again.
Prior to the comments from Dudley and Evans, the market forecasted a 40% chance that the Fed would raise rates in December. The Fed last raised interest rates less than a week ago on June 14. The rate hike is the second hike in 2017 and raised the interest rate by 25 basis points.
USD/CAD is up 0.40% and USD/JPY is up 0.04% in mid-morning trade on Tuesday.
The British pound struggled to maintain momentum on Tuesday following comments from the Bank of England’s governor Mark Carney. He commented that it’s not the time to hike interest rates despite three out of eight members of the Monetary Policy Committee voting to raise interest rates last week.
GBP/USD suffered major losses following the comments, falling 0.87% on the day to 1.2627. EUR/GBP rallied on the comments, rising 0.79% to 0.8820 on the day. GBP/JPY also lost ground, slipping 0.77% to 140.96.
Russia’s ruble is also under pressure on Tuesday tumbling after oil prices fell to their lowest levels since November. The currency fell 1.35 by 7:50 am after reports that key producers, including Libya and Nigeria, increased their oil supply. Brent crude oil fell 2.75% on the news and is trading at $45.64 a barrel.