NEW YORK (Reuters) – The U.S. dollar rose to its highest in six weeks on Wednesday as Federal Reserve Chairman Jerome Powell said the U.S. economy is “remarkably positive” and spoke of the need to continue raising interest rates.
FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo
Hawkish Fed speakers have helped elevate the greenback this week, after the Fed last Wednesday raised rates as expected and said it foresees another rate hike in December, three more next year and one in 2020.
Powell on Wednesday continued to talk up U.S. economic strength a day after hailing a “remarkably positive outlook” for the U.S. economy that he feels is on the verge of a “historically rare” era of ultra-low unemployment and tame prices.
Data on Wednesday supported the view that the U.S. economy is in strong shape. Services sector activity raced to a 21-year high in September and companies boosted hiring, signs of enduring strength at the end of the third quarter.
Private U.S. employers added 230,000 jobs in September, the most since February, according to the ADP National Employment Report, above economists’ expectations of 185,000.
The Fed is “still very much committed to a gradual path when it comes to rate hikes,” said Bipan Rai, head of North American foreign exchange strategy at CIBC Capital Markets in Toronto.
The dollar is outperforming as U.S. growth remains strong while economic data in other large economies including the euro zone has come in below expectations.
“One of the reasons we think why the dollar has been so bid in the last several months has been because the U.S. economy has been performing reasonably well, whereas we’ve seen a material slowdown in terms of data coming out of the euro zone and Japan and other large economies,” said Rai.
The euro is also being hurt by uncertainty surrounding Italy’s debt, fiscal plans and future ties with the rest of Europe, which has unnerved markets and exacerbated tensions with other euro zone leaders.
The euro has been testing key technical support at $1.1510-$1.1508, which was a temporary low set in June.
If the euro zone single currency sustains its break below this level it may next test the $1.13 area, which was the one-year low reached in August.
(This story has been refiled to correct price in second-last paragraph.)
Reporting by Karen Brettell; editing by Susan Thomas and James Dalgleish