By James Ramage
The dollar edged higher against the euro on Friday after Federal
Reserve Chairwoman Janet Yellen said the central bank remains on
track to raise interest rates sometime this year.
The dollar rose against the common currency--with one euro
buying $1.1015, stronger than the $1.1041 before Ms. Yellen's
comments--as it added to gains made earlier following strong U.S.
inflation data.
The greenback has gained 0.9% for the day, on pace to reach a
three-week high and post its strongest week in more than three
years. The dollar rose to JPY121.55 against the yen from JPY121.48
beforehand, now trading 0.4% higher on the day.
Ms. Yellen's comments before the Greater Providence Chamber of
Commerce in Rhode Island, acknowledged the pace of U.S. wage growth
has been "generally disappointing" but there were some encouraging
signs of a pickup since the start of the year.
The Fed chairwoman said the economy's soft patch over the first
quarter was transitory and that economic data should improve.
Ms. Yellen's comments "support the dollar's large gains today,"
Robert Lynch, head of developed-market currencies strategy for the
Americas at HSBC Bank USA. "Hearing the Fed chair reiterate that
rates are still expected to go up this year may resonate in the
market."
Earlier, the dollar rose against the euro and the yen after the
U.S. posted strong inflation numbers for April, likely nudging
forward market expectations for higher borrowing costs.
Numbers for U.S. inflation increased for a third consecutive
month, particularly those that exclude volatile food and energy
components, or "core" prices. The Federal Reserve watches inflation
numbers closely, alongside labor market data, in determining the
health of the U.S. economy and whether to raise interest rates for
the first time since 2006.
Stronger inflation numbers joined those for jobless claims and
housing starts in giving investors a sense that the U.S. economy is
pulling itself out of a slump that dragged growth down to just 0.2%
for the first three months of 2015. Many in the markets had
expected the economy to expand at a healthy pace and for the Fed to
raise interest rates, a move that would make the dollar attractive
while central banks in Japan and the eurozone were still easing
policy.
Write to James Ramage at james.ramage@wsj.com