Dollar hovers near three month highs as traders gauge rates outlook

rently think there’s a 70% chance the Fed holds rates next week, and a 30% chance of a 25 basis point (bp) increase.

They think the Fed could then raise rates by 25 bps in July, after policymakers hinted at a so-called skip. That would boost the Fed funds rate to a range of 5.25% to 5%.

The European Central Bank sets rates on Thursday and traders broadly expect a 25 bp hike, to be followed by another 25 bp increase in July, taking rates to 3.75%.

In Asia, the dollar was down 0.29% against Japan’s yen at 139.76 yen per dollar, after rising 0.37% the previous day.

The onshore and offshore yuan eased to their weakest in six months against the dollar, further pressured by economic worries.

Data released on Wednesday showed China’s exports shrank much faster than expected in May while imports extended declines, raising doubts about the country’s fragile economic recovery.

“To some extent, it’s a view that the trade data’s another symptom of a faltering recovery,” said Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY).

Meanwhile, the Turkish lira slipped to a record low of 23.39 per dollar in early Asia trading. It remained under pressure, last at 23.37.
Source: Reuters