By Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) -- The dollar rose against the yen
Wednesday after a better-than-expected reading on U.S. industrial
production in March suggested the economic recovery is
strengthening.
Industrial production in March grew 0.7%, beating forecasts of a
0.5% rise seen in a MarketWatch poll of economists. February's
industrial-production gain was revised to 1.2% from an initially
reported 0.7%.
"With industrial production rising at a decent pace in March,
the economy is now starting to show its true colors after the
weakness triggered by the bleakest of winters," said Paul Dales, a
senior U.S. economist at Capital Economics, in a note.
The dollar (USDJPY) rose to Yen102.25 from Yen101.89 late
Tuesday.
Federal Reserve Chairwoman Janet Yellen said Wednesday a strong
economy that meets the central bank's employment and
price-stability goals could be achieved by the end of 2016.
Yellen, who spoke at the Economic Club of New York, said the low
level of inflation has been caused in part by factors that are
likely to be temporary, such as lower prices for consumer energy
and imports.
"If we think that the Fed will be seeing its goals achieved by
the end of 2016, there may be a strong argument for not beginning
rate normalization until then," said Michael Woolfolk, global
markets strategist at BNY Mellon.
The Fed has embarked on a path to normalize monetary policy,
announcing a further cut in its monthly bond purchases to $55
billion at its March meeting. At this rate, the bond purchases
could wind down by the end of the year, leading to speculation
about when the Federal Reserve could begin to hike interest rates.
Yellen said after the March meeting there could be an approximate
six-month period between the end of bond purchases and the first
rate hike, an idea that has been somewhat discounted by the release
of the Fed's March minutes.
"There is little hope of a prolonged cyclical rally in the U.S.
dollar until we get off of zero interest rates," said Woolfolk.
Other U.S. data released Wednesday showed construction on new
homes in March rose 2.8% to a seasonally adjusted annual rate of
946,000. The Fed's Beige Book is due at 2 p.m. Eastern.
The ICE dollar index (DXY), which measures the greenback against
six rivals, was little-changed at 79.794 versus 79.795 late
Tuesday. The WSJ Dollar Index , which pits the dollar against a
wider basket of rivals, was unchanged at 72.96.
The Australian dollar (AUDUSD) rose to 93.75 from 93.57 U.S.
cents late Tuesday, boosted by better-than-expected Chinese
data.
China's gross domestic product growth slowed to 7.4% in the
first quarter from 7.7% previously, marking the slowest growth in
18 months. China is Australia's largest trading partner.
The U.S. dollar pushed above 1.10 Canadian dollars after the
Bank of Canada made no change to interest rates, as expected. In
recent trade, the U.S. unit (USDCAD) rose to 1.1008 Canadian
dollars from 1.0977 Canadian dollars late Tuesday. The BOC left the
target for its key rate, called the overnight rate, at 1%. In the
accompanying statement, the central bank noted higher energy prices
and a lower exchange rate should help push CPI inflation nearer its
2% target in "the coming quarters."
The euro (EURUSD) edged up to $1.3820 from $1.3812 late Tuesday.
European-Union consumer prices in March rose 0.5% from a year
earlier, marking the lowest annual rate since November 2009. The
tepid inflation rate is the latest to cause concern about deflation
in the euro zone, which could prompt further easing from the
European Central Bank.
The British pound (GBPUSD) rose to $1.6795 from $1.6723 late
Tuesday. The U.K. unemployment rate was an average of 6.9% between
December and February, falling from 7.1% in the prior three months.
The unemployment rate is now below the Bank of England's threshold
of 7%, which is one of several indicators used by the bank to
determine the path of interest rates. The Bank of England said in
August it wouldn't consider raising interest rates until the
unemployment rate fell to 7%.
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