Bloomberg: Dollar May Gain on Speculation U.S. Consumer Confidence Rose This Month

Dec. 9 (Bloomberg) — The dollar may strengthen in Asia on
speculation a report today will show U.S. consumer confidence
this month rose to the highest since August, adding to pressure
for further Federal Reserve interest-rate increases.

Higher U.S. rates than in Europe and Japan have helped the
dollar

rally more than 17 percent against the yen and 15 percent
versus the euro this year. The U.S. currency yesterday fell the
most in eight days after Japanese and European policy makers
suggested they will raise borrowing costs.

“A strong showing in consumer confidence will lead to
dollar buying, especially after its short-term decline,” said
Shigeru Nakane, a currency sales dealer in Tokyo at Resona Bank
Ltd. “It would reinforce the prospects for further U.S.
interest-rate hikes.”

The dollar traded at 120.40 yen at 8:24 a.m. in Tokyo from
120.33 yen late yesterday in New York, according to electronic
foreign-exchange dealing system EBS. The U.S. currency was at
$1.1814 per euro from $1.1817.

The dollar will move between 120 yen and 120.90 yen, and
$1.1780 and $1.1850 per euro today, Nakane said.

The University of Michigan’s consumer confidence index
probably gained to 85 from 81.6 in November, according to the
median estimate of 51 economists surveyed by Bloomberg.

Fed policy makers have raised their target rate 12 times
since June last year, to 4 percent, and will do so again Dec. 13,
according to economists surveyed by Bloomberg. The central bank
probably will lift the rate to 4.50 percent at its Jan. 31
meeting, interest-rate futures show.

Bank of Japan Governor Toshihiko Fukui yesterday said an
end to the bank’s deflation-fighting policy “is close,” while
European Central Bank Chief Economist Otmar Issing said further
rate increases will occur should inflation pose a threat. The
U.S. currency is poised for its best year since 2001 as the Fed
lifted its key rate seven times.

“We do expect more rate rises in the ECB next year, but
certainly not in a hurry,” said Stephen Halmarick, co-head of
economic and market analysis at Citigroup Global Markets
Australia Ltd. “In terms of Japan, we expect the end of
quantitative easing around the middle of the year, but it does
not necessarily mean the interest rate has to go up.”

The dollar will trade at 120.50 yen and $1.18 versus the euro
by year-end, Halmarick said.

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