Monetary policy divergence returned to the fore as central bank officials flagging prospects for interest-rate moves spurred the greenback to rebound and killed off a rally in the Aussie.
The Bloomberg Dollar Spot Index added to gains after rising Monday by the most in 1 1/2 weeks when Federal Reserve Bank of New York President William C. Dudley said he’s relatively optimistic that a rebound in U.S. growth will support a decision to raise interest rates later this year. The Australian dollar extended losses after minutes of the central bank’s April meeting underscored comments by Governor Glenn Stevens, who said cuts to borrowing costs remain possible.
“The Fed is not suggesting pushing back the timing of the rate hike further and further, so the dollar is firmly supported,” said Masafumi Yamamoto, a senior strategist at Monex Inc. in Tokyo. “There’s a risk, however, that the first-quarter gross domestic product could be much weaker than forecast, so it’s difficult to buy up the dollar” before the data’s release on April 29.
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