Dollar Goes Up On Fed Inflation View; Canada Dollar Appreciates

Rate Range Projection by Bank

Next week 101.60- 102.30

Next 3 months 100.00 - 105.00

The Canadian dollar rallied to a five-month high after reports showed inflation and retail sales exceeded projections. A gauge of currencies volatility increased from a record low. Economic data next week will show recovery of the world’s biggest economy is still uneven. The Markit Economics preliminary index of U.S. manufacturing slid in June to 56 from 56.4 a month earlier, according to a Bloomberg survey before the data on June 23. A reading above 50 indicates growth.

Economists in a separate survey predict existing home sales will rise 1.9 percent from 1.3 percent a month earlier. “The dollar will continue to consolidate,” said Kazuo Shirai, a trader at Union Bank NA in Los Angeles. “Unless we see the next key U.S. data turn positive, this mini trend of dollar selling is here to stay.”Yellen brushed aside concern that inflation will quicken in her opening statement and press conference on June 18, emphasizing the Federal Open Market Committee’s view rates are likely to stay low for a “considerable time.”

The dollar rose against the euro as Treasury yields climbed on speculation inflation may accelerate faster than Federal Reserve Chair Janet Yellen projects and prompt the central bank to increase interest rates next year. The U.S. currency headed for its biggest weekly decline against the euro in two months as the Fed announced June 18 it will reduce monthly bond-buying while holding its interest-rate target at virtually zero.

Futures traders are pricing in a 93 percent chance the board will keep the federal funds target rate at zero to 0.25 percent by the end of this year, according to data compiled by Bloomberg.