The U.S. dollar strengthened for a second day after falling to the lowest in almost a year.
This was after two Federal Reserve officials reportedly said an interest-rate increase could be considered in May provided the U.S economy stayed on track.
“The big question hanging over the market this year is whether or not the Fed is any more wedded to the idea of two rate hikes than it was to the idea of four rate hikes back in December,” said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. “Any sense that there’s a new thought process permeating through the Fed system will impact on the price action because you have a very jumpy market.”
Dollar Spot Index rose 0.4 percent as of 6:58 a.m. New York time, and has gained 1.6 percent from a one-year low.
The yen fell against the dollar following Japan’s Minister of Finance, Taro Aso comment that “recent movements have been one-sided and action will be taken as needed”. The Euro climbed above $1.16 to reach $1.1615 against the dollar before falling to $1.1447.
“Euro-dollar was in overbought territory using either rate spreads or oil as a predictor and the dollar-yen slide looked overdone, despite no action by the Bank of Japan,” said Stuart Bennett, head of Group-of-10 currency strategy in London at Banco Santander SA. “Add that to ‘hawkish’ Fed rhetoric and you get a correction.”