Kevin Buckland
TOKYO (Reuters) – The dollar hovered near a one-week high on Thursday after its best day this month against major currencies after minutes from the Federal Reserve’s latest meeting revealed some officials were willing to raise interest rates.
The New Zealand dollar extended gains as a surprise rise in local retail sales added to the hawkish forecast of the central bank a day earlier, which abandoned bets on a rate cut.
Sterling remained resilient after hitting a one-month peak following higher-than-expected inflation and also received support from the announcement of UK parliamentary elections on July 4.
Ether continued to hover near Tuesday’s more than two-month peak amid speculation over the potential approval of a U.S. spot exchange-traded fund that would track the world’s second-largest cryptocurrency.
The index, which tracks the currency against six major rivals including sterling, the euro and the yen, was little changed at 104.85 after rising 0.28% overnight.
Fed officials at the April 30-May 1 meeting said they still believe price pressures will ease, albeit slowly, but the meeting summary also included discussion of a possible rate tightening.
“The minutes highlighted concerns that inflation may not fall as quickly as expected and that some bank members are prepared to raise rates further if necessary,” James Knightton, senior corporate FX dealer at Convera, wrote in a note to clients, backing the dollar.
“Consequently, expectations for the first rate cut have shifted from September to November. With the Federal Reserve meeting taking place immediately after the US election, early November could see significant market volatility.”
The dollar was little changed at 156.755 yen after rising overnight to 156.85, its highest level since May 1, even as traders fear the risk of intervention from Japanese authorities to support the currency.
Nearly half of Japanese firms say the yen’s fall above 155 to the dollar is bad for their business, about double the percentage who see the currency’s weakness as a positive, a Reuters poll showed on Thursday.
To counter the yen’s fall, 37% of respondents wanted the central bank to raise interest rates again, while 34% wanted the government to intervene in the foreign exchange market.
The euro rose 0.08% to $1.08305 but remained near an overnight low of $1.08175.
Sterling held at $1.2723 after surging to $1.27610 on Wednesday for the first time since March 21 as persistent inflation undermined bets on a June Bank of England rate cut.
Meanwhile, Prime Minister Rishi Sunak has called a national election that his Conservatives are widely expected to lose to the opposition Labor Party after 14 years in power.
“A Labor win with the prospect of a softer Brexit would be GBP+, especially against the euro,” TD Securities analysts wrote in a note.
“However, the pound is only likely to trade in this direction in the run-up to the election, as inflation and rate divergence remain the main drivers of the exchange rate, especially with the first cuts.”
It rose 0.4% to $0.6121 after data released on Thursday showed New Zealand retail sales rose 0.5% in the first quarter, missing expectations for a slight fall.
The Reserve Bank of New Zealand surprised markets on Wednesday by raising its forecasts for peak interest rates and backing away from an expected cut.
Among cryptocurrencies, Ether was trading at around $3,769, slightly higher than Wednesday’s close. On Tuesday, the price rose to $3,838.80 for the first time since March 15.
Bigger rival Bitcoin was little changed at $69,432 after hitting $71,957 on Tuesday for the first time since April 9.