Sterling, US dollar gain on euro and yen

Story link: Sterling, US dollar gain on euro and yen

In an up-and-down day, the US dollar managed to be slightly stronger by the middle of the trading day on Wednesday. The downward trend of oil prices helped the greenback gain strength, as did the changing probabilities that the Federal Reserve would raise interest rates again this year.

Before Hurricane Katrina, virtually all analysts agreed that there would be two more hikes in rates this year and there was a 50/50 chance of three hikes, but now the chance of a rate hike in September is pegged at 68 percent, while the chances of one or two rate hikes by December are generally thought to be only 50 percent. UBS and Credit Suisse Asset Management, however, both warned that the dollar was facing a tough time in the near-term, and CSAM said on Wednesday that it was orienting its portfolios in the direction of Europe and Japan.

The US dollar gained 0.1 percent to $1.2449 in relation to the euro, was also up 0.1 percent to $1.8397 against sterling, and added 0.4 percent to ¥110.03 in relation to the yen.

The Canadian dollar was uncertain as the Bank of Canada raised interest rates in that nation by 25 basis points to 2.75 percent. The rate hike was expected, but disagreements among analysts over what it meant lent uncertainty to Canada’s currency. By mid-day in New York, the Canadian dollar had risen by just 0.2 percent to $1.1874 in relation to the US dollar.

The Australian dollar was also up on the day, by 0.5 percent to ¥84.57 after new data showed the Australian GDP up more than had been expected and the Reserve Bank kept interest rates where they were.

Sterling was slightly stronger on a small rise in the UKs Halifax housing price index. The UK currency gained a fraction in relation to the euro, to £0.6763, and was up by 0.3 percent to ¥202.51 against the yen.