The euro pushed higher against the dollar on Friday, but remained within striking distance of 14-month lows as the prospects of an early hike in U.S. interest rates continued to underpin investor demand for the greenback. Expectations that the Federal Reserve is growing closer to raising interest rates continued to support the dollar, with the European Central Bank likely to stick to its looser monetary policy stance. A study by the San Francisco Fed published on Monday indicated that central bank officials see rates rising sooner than markets expect. The Fed was expected to cut its asset purchase program by another $10 billion at its upcoming policy meeting next week which would keep it on track for winding up the program in October, and to start raising interest rates sometime in mid-2015.
The pound moved higher against the dollar on Friday, but gains were held in check as concerns over the prospect of Scottish independence continued to dampen investor demand for the British currency. Sterling found support after two new opinion polls on the Scottish independence referendum showed that support for the no campaign was back in the lead ahead of the September 18 referendum. The pound weakened across the board earlier in the week after another opinion poll indicated that support for Scottish pro-independence voters had gained momentum, fuelling concerns over the prospect of a yes vote. Uncertainty over what currency an independent Scotland would use, as well as concerns over how much of the U.K. national debt it would take sparked a broad based selloff in sterling.
The U.S. dollar rose to its highest level in just over six years against the yen on Friday as expectations that the Federal Reserve is growing closer to raising interest rates continued to underpin investor demand for the greenback. Expectations that the Federal Reserve is growing closer to raising interest rates continued to boost the dollar against the yen, with the Japanese central bank likely to stick to a looser monetary policy stance. A study by the San Francisco Fed published on Monday indicated that central bank officials see rates rising sooner than markets expect. The yen remained under pressure after Bank of Japan Governor Haruhiko Kuroda said Thursday that the bank would be prepared to immediately loosen monetary policy or implement other measures if its 2% inflation target becomes difficult to meet. Earlier in the week official data showed that Japan’s second quarter economic contraction was larger than initially estimated, and another report showed that the country’s current account surplus fell short of expectations in July.
