Dollar Soars to Two-Month Highs as Investors Anticipate Rate Hike

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The dollar surged to two-month highs against competing major currencies on Tuesday, as hopes for a June interest rate increase by the Federal Reserve bolstered investor demand for the American currency.

USD/JPY gained 0.38% to trade higher at 109.658.

The yen inched lower after Japanese Finance Minister Taro Aso said that he will be taking an extremely careful tact in discussing specific foreign exchange rates.

Meanwhile, demand for the dollar remained strong after James Bullard, St. Louis Federal Reserve President, said Monday that more factors favored a gradual interest rate increase versus keeping them unchanged.

In a separate statement, San Francisco Federal Reserve President John Williams said he still foresees the central bank hiking interest rates two to three times in 2016.

EUR/USD edged lower, shedding 0.34% to a new two-month low of 1.1182.

The greenback was weaker compared the pound, with GBP/USD rising 0.65% at 1.4578, but was stronger against the Swiss franc, with USD/CHF tacking on 0.25% to trade at 0.9920.

The Australian and New Zealand dollars performed poorly against their American rival, with AUD/USD falling 0.79% at 0.7166 and with NZD/USD declining 0.50% to 0.6729.

Elsewhere, USD/CAD gained 0.13% to trade higher at 1.3158, the most since April 5.

Commodity currencies weakened after oil prices continued to fall on Tuesday, amid renewed worries over a global oversupply.

The U.S. dollar index edged higher, adding 0.21% at 95.43 on Tuesday, the highest it registered since March 29. The index tracks the dollar’s strength against a bunch of six major currencies.

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