Dollar Climbs on Interest Rates Raise Speculations

The dollar gained versus the main currencies as speculations that the U. S. Government will raise its interest rates by the end of the year, consequently causing a bearish day in equities markets around the world.

High-yield currencies like the South African rand had a negative day against the dollar as the Fed fund futures showed a 40 percent possibility of interest rates raise for the second semester, a high jump from the previous 13 percent chance from a week ago. The yen was the only main currency that did not have a negative day versus the dollar, as domestic favorable news like the falling number of bankruptcies improved confidence among merchants and Japanese investors, making the greenback to end a rally that brought the yen to a one-month low. The U. S. currency also posted sharp gains against the Great Britain pound, as the government crisis in the U.K. deepens, and the future of Prime Minister Gordon Brown is uncertain.

There is a wave of optimism favoring the greenback, according to economists. Several factors indicate for a stronger dollar to come for the following weeks, not only a sequence of positive reports and speculations is raising the traders’ confidence to buy assets in dollars, a consistent sentiment among specialists that the dollar has been excessively sold over the past two months may help the dollar to enter a significant uptrend.

EUR/USD traded at 1.3900 from a previous price of 1.3969. GBP/USD traded at 1.5800 from 1.5981.