By Lisa Twaronite, MarketWatch
TOKYO (MarketWatch) — The dollar firmed against the yen in Asian trading Monday, getting a lift from expectations of higher U.S. interest rates after comments from a Federal Reserve official late last week.
Against the Japanese yen, the dollar (USDYEN 81.6800, +0.3500, +0.4303%) rose to ¥81.73 from ¥81.46 in late Friday’s North American trading.
The dollar index (DXY 76.38, +0.16, +0.21%) , which measures the U.S. unit against a basket of major rivals, was at 76.241, compared with 76.242 in North American trade late Friday.
The euro (EURUSD 1.4033, -0.0012, -0.0854%) rose to $1.4082 from $1.4068 late Friday, while the British pound (GBPUSD 1.5978, -0.0027, -0.1687%) slipped to $1.5983 from $1.6020 late Friday.
“We expect relative interest rates to remain a strong driver of [foreign-exchange] markets this week and will be especially important” for the U.S. dollar, said analysts at Barclays Capital.
The dollar ”saw a modest rebound late last week along with Fed rate-hike expectations on the back of hawkish comments from several Fed officials,” they said.
One of those officials was Charles Plosser, the president of the Philadelphia Federal Reserve Bank and a voting policy- committee member this year. The Fed should hike interest rates from the current range near zero to 2.5% within a year under a plan Plosser unveiled Friday.
In a speech to economists from the monetarist school on Friday, Plosser laid out an aggressive plan whereby the Fed would sell $125 billion of assets for each quarter-point increase in the funds rate.
A slower approach could last 18 months rather than a year, he said. This would require only $67 billion of conditional sales between meetings but the funds rate would rise to 3.5%.
Plosser did not give a specific time when this exit would begin but said it would have to start in the “not-too-distant future.”
