USDJPY surges above 110 yen after FOMC minutes suggest June rate hike possible

The US dollar rallied on the possibility of the Federal Reserve lifting interest rates as early June. The release of the FOMC minutes of the April meeting sparked expectations of a rate hike next month as they showed that several Federal Reserve policymakers believed it would be “appropriate” to lift benchmark interest rates on June 15 if economic data and labour market conditions keep strengthening and inflation approaches the 2 per cent target.

The prospect of US interest rates heading higher sooner than markets previously expected saw the dollar index, a measure of the US currency against a basket of global peers, strengthen by a further 0.1 per cent on Thursday to 95.157, having gained 0.6 per cent on Wednesday. US Treasuries continued to rally, while gold, which is sensitive to US interest rate expectations was down 0.1 per cent at $1,257.68 an ounce today.

After the minutes were released, the USDJPY pair surged to 110.24 in late US session trading on Wednesday and to 110.26 in Asia. The pair eased back down slightly after the yen was boosted by 0.2 percent after data showing Japan’s machinery orders, rebounded strongly in March.

The Australian dollar was 0.2 per cent weaker at $0.7214 following the release of employment data today that showed the economy added slightly fewer jobs than expected in May and the unemployment rate remained unchanged at 5.7 per cent.

The stronger US dollar took some of the shine off oil markets, where prices had been threatening earlier this week to rise above $50 a barrel mark for the first time since November. Today, Brent crude, the international benchmark, was down 1.7 per cent at $48.11 a barrel, while West Texas Intermediate, the US marker, shed 1.5 per cent to $47.48.

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