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Dollar Rises Off Five-Month Low - WSJ

APRIL 20, 2017

Investors focus on U.S. economy

By Chelsey Dulaney

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The dollar bounced off a five-month low Wednesday as investors brushed off recent geopolitical tensions.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.4% to 89.82 after closing at its lowest level since Nov. 10 a day earlier. The greenback rose 0.4% against the Japanese yen. Before Wednesday, the dollar had fallen against the yen in five of its last seven trading sessions.

The yen and other safe-haven assets such as gold have jumped recently amid mounting geopolitical tensions, but traders refocused on the U.S. economy Wednesday.

The Federal Reserve’s so-called beige book, a report on regional economic conditions, showed that inflation continues to edge higher. The anecdotal report comes after government data released Friday showed a surprise decline in consumer prices, including the first decline in core prices since 2010.

The Fed has been watching consumer-price measures closely, as firming inflation would support the central bank’s case for raising rates.

Meanwhile, Boston Fed President Eric Rosengren said in a speech Wednesday he would like the Fed to shrink its bond portfolio slowly, allowing the central bank to continue raising rates. Some investors had feared the Fed would hold off on raising rates while it unwound the portfolio.

Still, investors remain cautious on the outlook for higher U.S. rates. Markets are pricing in a 4% chance that the Fed raises rates at its May meeting and a 48.5% chance that it raises rates at its June meeting, according to CME Group data.

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Signs that the Fed could raise rates more aggressively would support the dollar, which has been whipsawed in recent weeks by soft economic data and by comments from President Donald Trump indicating he would prefer a weaker currency.

Scotiabank analysts said the dollar should remain somewhat supported by higher yields in the U.S., while the greenback’s big selloff since the start of the year adds to its appeal.

“The U.S. dollar is looking a little ‘cheap,’” analysts wrote in a research note.

In other currencies, the dollar rose 0.5% against the British pound. That comes after sterling soared more than 2% Tuesday on news that British Prime Minister Theresa May called a surprise early general election for June 8. The election is seen as generally positive for the beleaguered pound, as Mrs. May could boost her majority in the House of Commons and improve the prospect for a smooth Brexit process.

The euro slipped 0.2% against the dollar as investors remained cautious ahead of the French election, which begins this weekend.

Corrections & Amplifications 
Before Wednesday, the dollar had fallen against the yen in five of its last seven trading sessions. An earlier version of this article incorrectly stated the dollar had a five-day losing streak. (April 19, 2017)

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

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