FOREX-Bets on September U.S. rate hike keep dollar strong
(Updates, adds new comment)
* Greenback seen supported after US GDP backs rate rise view
* Some caution toward chasing dollar/yen higher-trader
* Next (Other OTC: NXGPF - news) week's U.S. jobs data seen as key driver
By Jemima Kelly
LONDON, July 31 (Reuters) - The dollar steadied near a one-week high against a basket of currencies on Friday and was on track for an almost 2 percent monthly rise, with the latest U.S. growth data supporting the case for the Federal Reserve to raise interest rates this year.
The greenback had rallied across the board on Thursday, hitting a seven-week high against the yen, after numbers showed U.S. economic growth accelerated in April to June, encouraging bets on a September U.S. rate hike.
Though the numbers were mixed, with second-quarter growth coming in a little weaker than expected but with first-quarter growth revised upwards, they followed a Fed statement late on Wednesday that left the door open for a September move. When it comes, it will be the first rise in rates since 2006.
"Expectations of a September rate hike were probably marginally firmed up on the growth data but it wasn't game-changing," said RBC Capital Markets' global head of FX strategy in London, Adam Cole. "We now turn to next week's payrolls as the critical number."
The U.S. non-farm payrolls employment figures are due on Aug. 7.
Traders will also be watching out for euro zone inflation data due at 0900 GMT, which is expected to show the pace of consumer price rises stayed at 0.2 percent in July. But Cole said that for the next six weeks U.S. data would be more important in driving the currencies market.
"Our sensitivity to news flow out of Europe has diminished greatly I think relative to the Fed, where we're a month and a half away from a rate decision which is pretty much 50/50 balanced at the moment," he said.
The view that a U.S. rate hike would come by the end of the year has helped the dollar gain almost 2 percent against a basket of major currencies this month. The index traded at 97.585 on Friday after rising to as high as 97.773 on Thursday, its strongest performance in more than a week.
The dollar was 0.1 percent higher at 124.26 yen on Friday, close to the seven-week high of 124.58 yen set on Thursday.
Shinji Kureda, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo, said market players were likely to be wary of buying the dollar at levels above 124.50 yen. Bank of Japan Governor Haruhiko Kuroda said in June he saw no reason for further currency weakness when the dollar was around 125 yen.
"The trend of dollar strength will probably continue heading into the U.S. jobs data next week," he said.
The euro was flat at $1.0930 on Friday but for the month is down almost 2 percent. (Additional reporting by Masayuki Kitano in Singapore and Hideyuki Sano in Tokyo; Editing by Greg Mahlich)