July 18, 2018 / 2:55 PM / 5 months ago

FOREX-Bullish comments by Fed's Powell boost U.S. dollar

    * Dollar index hits three-week high
    * Yen tumbles to six-month low, euro also weaker
    * Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

 (Adds comment, FX table, updates prices, changes byline,
dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 18 (Reuters) - The dollar rose to a
three-week high on Wednesday, as demand increased after upbeat
comments from U.S. Federal Reserve Chairman Jerome Powell about
the U.S. economy.
    In congressional testimony on Tuesday, Powell said he
believed the United States was on course for years more of
steady growth, and played down the risks to the U.S. economy of
the escalating trade conflict.
    He reiterated his remarks on Wednesday before a U.S. House
panel.
    Though Powell did not alter future expectations on U.S.
monetary policy, traders saw his comments as signifying that
authorities were comfortable with the greenback's near 6 percent
rise against its rivals in the last three months.
    "For now, the market is of the view that the Fed is not
overly concerned with the impact that a trade war could have,"
said Omer Esiner, chief market analyst, at Commonwealth Foreign
Exchange in Washington.
    "The comments from the Fed have put the focus on the
divergent policy outlook between the Fed and other central
banks. We're seeing that play out with the stronger dollar," he
added.
    Against a basket of six major currencies, the dollar
rose 0.3 percent to 95.202, after earlier hitting a three-week
high, nearing a one-year peak of 95.53 hit in late June.
    Data showing U.S. housing starts fell 12.3 percent in June
briefly pared the dollar gains, however.
    The greenback reserved most of its gains against the
relatively higher-yielding currencies such as the Australian
, Canadian, and New Zealand dollars.
    Though concerns the U.S. economy may be nearing a peak as
evident from a flattening yield curve and falling inflation
adjusted-yields, the widening rate differentials between the
U.S. and other major markets also lifted the greenback.    
    MIND THE GAP
    The Fed is expected to hike rates two more times in 2018 to
tackle rising inflationary pressures. Comparatively, the ECB is
expected to start raising rates only in mid-2019.
    With U.S. rates continuing to rise and most other major
central banks taking only tentative steps towards monetary
normalization, many analysts expect more dollar upside. RBC is
forecasting a year-end euro/dollar of $1.12.
    The dollar rallied to as high as 113.13 against the yen
, its strongest since January 9. It was last at 112.79,
slightly down on the day.
    The euro, meanwhile, fell 0.2 percent to $1.1635.
    In China, the yuan came under a renewed bout of selling
against the dollar, which rose 0.4 percent to 6.7485 in
offshore markets.
    
    ========================================================
    Currency bid prices at 10:25AM (1425 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1638        $1.1659     -0.18%         -2.98%      +1.1665     +1.1602
 Dollar/Yen       JPY=        112.8200       112.8500    -0.03%         +0.13%      +113.1300   +112.7300
 Euro/Yen         EURJPY=     131.30         131.61      -0.24%         -2.87%      +131.7700   +130.8900
 Dollar/Swiss     CHF=        1.0000         1.0000      +0.00%         +2.64%      +1.0034     +0.9985
 Sterling/Dollar  GBP=        1.3043         1.3112      -0.53%         -3.47%      +1.3123     +1.3011
 Dollar/Canadian  CAD=        1.3241         1.3188      +0.40%         +5.28%      +1.3259     +1.3191
 Australian/Doll  AUD=        0.7364         0.7386      -0.30%         -5.60%      +0.7395     +0.7343
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1638         1.1661      -0.20%         -0.44%      +1.1669     +1.1603
 Euro/Sterling    EURGBP=     0.8920         0.8890      +0.34%         +0.42%      +0.8924     +0.8875
 NZ               NZD=        0.6777         0.6782      -0.07%         -4.39%      +0.6788     +0.6744
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.1853         8.1509      +0.42%         -0.26%      +8.1994     +8.1453
 Euro/Norway      EURNOK=     9.5268         9.5058      +0.22%         -3.27%      +9.5405     +9.4918
 Dollar/Sweden    SEK=        8.8806         8.8388      +0.27%         +8.28%      +8.8869     +8.8362
 Euro/Sweden      EURSEK=     10.3358        10.3079     +0.27%         +5.05%      +10.3378    +10.2940
 
    
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
James Thorne in New York and Tommy Wilkes in London)
  
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