The dollar is mostly higher against its major competitors Friday afternoon, but is little changed overall. The U.S. currency is posting modest gains against the Japanese Yen and the British pound, but is nearly flat in comparison to the Euro.
Investors finally received the clarity they had been seeking on the direction of U.S. monetary policy, following a speech from Janet Yellen late Thursday. U.S. GDP data also came in stronger than expected this morning.
Fed chief Janet Yellen stated yesterday that the Fed remains on track to raise interest rates by year’s end. Specifically, Yellen said the more “prudent strategy is to begin tightening in a timely fashion and at a gradual pace.”
“If the FOMC were to delay the start of the policy normalization process for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting its goals,” Yellen said in prepared remarks at the University of Massachusetts.
The remarks came a week after the Fed left interest rates near zero yet again. The move left investors confused about when the long-anticipated interest rate hike – the first in nearly a decade – was likely to happen. U.S. economic growth was revised higher for the April-to-June period, raising expectations that the Federal Reserve will soon raise interest rates.
Updated government data showed that the U.S. Gross Domestic Product expanded at a revised rate of 3.9 percent in the second quarter. This was revised up from the 3.7 percent growth that was reported last month.
U.S. consumer sentiment fell in September compared to the previous month, according to a survey released Friday
The University of Michigan’s final September reading on the overall index on consumer sentiment came in at 87.2, down from 91.9 in August.
The dollar rose to an early high of $1.1115 against the Euro Friday, but has since eased back to around $1.1180, nearly unchanged for the session.
French consumer confidence strengthened in September to the highest level in almost eight years, figures from the statistical office INSEE showed Friday. The consumer confidence index rose to 97 in September from 94 in the previous month, which was revised up from 93. Economists had forecast the same score of 94.0 for the month.
The Bank of England sees risks in both China and emerging market economies to affect U.K. financial stability through the direct exposures of British banks.
BoE’s Financial Policy Committee said Friday that the immediate risks in relation to Greece and the euro area have fallen somewhat but other downside risks to financial stability stemming from the global environment have increased.
Disorderly conditions in one market can spill over to others. The FPC cautioned about future heightened volatility and reductions in market depth.
The buck has extended its winning streak against the pound sterling to a sixth consecutive session Friday, rising to a 3-week high of $1.5134. The dollar has since retreated slightly to around $1.5170.
The Japanese government downgraded its economic view for the first time since last October as it sees risks from slowdown in China and normalization of interest rate in the U.S.
In its monthly report, the Cabinet Office said Friday the economy is on a moderate recovery, while slowness can be seen in some areas. The government said it will closely monitor the fluctuation in financial markets.
The greenback rose to a 2-week high of Y121.234 against the Japanese Yen Friday, but has since slipped back to around Y120.850.
Overall nationwide consumer prices in Japan gained 0.2 percent on year in August, the Ministry of Internal Affairs and Communications said on Friday – unchanged from the July reading and exceeded forecasts for an increase of0.1 percent
Core inflation, which excludes the volatile costs of food, was down 0.1 percent on year in August, matching expectations following the flat reading in the previous month.
Producer prices in Japan were up 0.7 percent on year in August, the Bank of Japan said on Friday. That topped expectations for an increase of 0.5 percent following the 0.6 percent gain in July.