Dollar Snaps Three-Day Slide on Higher Rate-Increase Probability

A gauge of the dollar snapped a three-day slide after two Federal Reserve officials suggested markets were underestimating the likelihood of increases in U.S. interest rates.

The Bloomberg Dollar Spot Index halted declines near the weakest level in more than three months as the probability the Federal Reserve will boost interest rates by December rose past 50 percent for the first time since June 23, when the U.K. voted to leave the European Union in June. New York Fed President William Dudley and Atlanta Fed President Dennis Lockhart indicated the central bank could potentially raise rates as soon as next month.

“While Dudley was at least able to stem the bleeding for the dollar index, price action is not encouraging for the dollar near term,” said Sean Callow, a senior foreign-exchange strategist at Westpac Banking Corp. in Sydney. “Still, so long as a rate hike seems more likely than not as the Fed’s next move, we wouldn’t get super bearish on the dollar.”

The Bloomberg Dollar Spot Index, which measures the U.S. currency against 10 peers, was little changed as of 9:12 a.m. in Tokyo, following a three-day 1 percent slide. The measure reached its lowest level since May 3 on Tuesday.

The dollar gained 0.1 percent to 100.45 yen and was steady at $1.1277 per euro.