The dollar strengthened on Tuesday to a two-week high against a basket of currencies as investors looked ahead to crucial jobs data this week for clues on when the Federal Reserve will next raise interest rates. Hawkish comments on Friday by Fed Chair Janet Yellen and Vice Chair Stanley Fischer have increased expectations the US central bank could hike at its September policy meeting, though most investors and economists view a single increase at the December meeting as more likely.
The next key indicator is Friday's jobs report for August, which is expected to show that employers added 180,000 jobs in the month, according to the median estimate of 89 economists polled by Reuters. "We had a bit more hawkish tone from Yellen at Jackson Hole and that was reinforced by Fischer," said Mark McCormick, North American head of FX strategy at TD Securities in Toronto.
"The market is refocusing itself on the upcoming data releases and I think that's helping a rethink of where the Federal Reserve's going to be in the second half of the year," he said. Friday's jobs data will be preceded on Wednesday by the ADP National Employment Report of private-sector payrolls. The dollar index, which measures the currency against a basket of six majors, rose to 95.899, its highest level since August 12. The greenback gained 0.68 percent against the yen to 102.59, the highest level since August 8. The yen was also pegged back by comments from policymakers worried about its recent strength.