The US dollar surged against the yen in Asian trading on Monday as Fed Chair Janet Yellen reinforced expectations that the Fed could be on track to raise rates by the summer.
Speaking at Harvard University on Friday, Yellen said that a rate rise would be appropriate “in the coming months”. Her message was repeated by St. Louis Fed President James Bullard on Monday. Bullard said that markets globally were “well prepared” for a June or July rate hike adding that the rebound in US growth appears to be “materialising in the second quarter”.
The dollar hit a one-month high of 111.38 yen in late Asian session on Monday, while the euro fell to a 2½-month low of 1.1097 dollars.
Asian equity markets opened lower today as the prospect of higher US interest rates weighed on stocks. However, the major indices soon recovered to turn positive with the Nikkei 225 index closing 1.4% higher. Tokyo stocks were boosted by the weaker yen as well as by reports on Friday that Japan’s Prime Minister Shinzo Abe is planning to postpone the sales tax hike in 2017 until 2019.
Commodity currencies drifted lower on Monday as Fed rate hike expectations and weaker commodity prices weighed on sentiment. The Australian dollar was trading near three-month lows at 0.7171 versus the greenback, while the New Zealand dollar hit a two-month low of 0.6674 earlier in the day.
The Canadian dollar was also down on the day as it was dragged lower by softer crude oil prices. WTI oil futures were down 0.3% at $49.19 a barrel in Asian trading in anticipation of rising production from the Canadian oil sands. Canadian oil output is expected to increase later this week following the shutdown of some plants when they were hit by wildfires earlier this month. The US dollar was up 0.4% at 1.3064 against the loonie in late Asian session.
Another big faller on Monday was gold, which continued to retreat from the strong dollar. Gold prices hit their lowest since February, and briefly fell below $1200 an ounce before rebounding slightly.
The rest of the day is expected to be quiet as US and UK markets are closed for a public holiday. The main data of the day will likely come from the latest Eurozone economic sentiment survey and the German flash inflation estimate for May.