SINGAPORE: The dollar eased in Asian trade Friday but maintained most of its gains after Federal Reserve head Janet Yellen indicated US interest rates could rise early in 2015.
The greenback bought 102.35 yen in Singapore late morning trade, easing from 102.42 yen in late New York Thursday, while the euro edged up to $1.3785 from $1.3779. It had been sitting at $1.3930 and 101.51 yen before the Fed remarks.
The single currency dipped to 141.11 yen from 141.14 yen. However, trading was subdued with Japanese financial markets closed for a holiday.
Yellen said Wednesday the US may start raising interest rates “around six months” after the Fed’s stimulus programme ends, suggesting borrowing costs will go up in the first half of 2015. Her comments came after the Fed said it would cut its monthly asset purchases by a further $10 billion for a third successive meeting.
Many analysts had forecast an interest rate rise around the back end of next year.
“There is an obvious shift in market expectations towards more hawkishness by the Fed,” Phillip Futures said in a market commentary.
“Yellen expressed optimism in the rate of growth (of the US economy) and said interest rates could be raised around six months after the complete removal of asset purchases. This means the Fed may raise rates as soon as this time next year,” it said.
Phillip Futures added that “this raises further the prospects for strengthening in the dollar and reduces further the prospects for inflation”.
French bank Credit Agricole said in a market statement: “More supported rate expectations may suggest that the greenback is about to become more sensitive to incoming growth data.
“If so, there may be room for the currency to appreciate further, especially if prospective data proves more constructive.”