The US dollar was flat against the Japanese yen but rallied against other most-traded currencies during the Friday’s trading session. The major reason for the currency’s strength remained the outlook for an interest rate hike in December.

Earlier this week, New York Fed President William Dudley said that he expects a rate increase this year if US economic growth remains on track. Currently, speculators price in 70% chance of a hike in December as shown by the CME FedWatch page. That is compared to 64% two weeks ago, though the figure was even higher earlier during the current session at 74%.

The greenback was especially strong against the euro, which was vulnerable after Thursday’s Policy meeting of the European Central Bank. The ECB left its policy unchanged, and Bank’s President Mario Draghi signaled that he may prolong extremely loose monetary policy if necessary, stating:

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net Asset Purchases. Regarding non-standard monetary policy measures, we confirm that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

EUR/USD dropped from 1.0929 to 1.0862 as of 18:17 GMT today. GBP/USD declined from 1.2251 to 1.2217. USD/JPY traded at 103.85, not far from the opening level of 103.94.

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Post tags: CME FedWatch, Dollar, EUR/USD, European Central Bank, GBP/USD, Interest Rates, Mario Draghi, United States, USD/JPY, William Dudley

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