The US dollar surged to one-month highs against a basket of currencies Friday after Federal Reserve Chair Janet Yellen left the possibility of a 2015 rate hike on the table, as investors eyed revised GDP figures.
In a speech to the University of Massachusetts Amherst on Thursday Yellen said she expects the central bank to begin raising rates later this year, provided that inflation remained stable and the economy continues to improve.
“It will likely be appropriate to raise the target range of the federal-funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labor market improves further and inflation moves back to our 2% objective,” Yellen said in a prepared speech.
The US dollar snapped a two-day losing streak on Friday, rising to its highest level since August 18. The dollar index, a weighted average of the greenback against six global rivals, rose 0.5% to 96.48.
The dollar received an additional boost after government data showed the US economy expanded faster than forecast in the second quarter. The US economy expanded 3.9% annually in the April to June period, final estimates from the Commerce Department showed. The estimate was above forecasts calling for no change.
The revised reading was largely driven by growth in consumer spending, official data showed. Consumer spending, which accounts for two-thirds of US economic output, was revised up to 3.6% from 3.1% reported last month.
The US dollar notched up gains against the yen, euro and British pound. It declined slightly against the Canadian dollar and was virtually unchanged versus the Swiss franc.
Gold lost some of its safe haven appeal on Friday after rallying nearly $25 the previous day. Gold for December delivery was down $10.50 to $1,143.30 per troy ounce.
European stock markets rebounded on Friday after a volatile weak, with Eurozone blue-chip STOXX 50 gaining more than 3%. The FTSE 100 in London advanced more than 2.5% and the DAX in Frankfurt was up 3%.
European markets were under pressure throughout the week as the Volkswagen emissions scandal came to light, resulting in the resignation of company CEO Martin Winterkorn.
Asian markets ended mixed on Friday. Tokyo’s Nikkei Index rose more than 300 points or 1.8%, while China’s Shanghai Composite Index fell 1.6%, its second decline in the past three days.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.