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Dollar gains on increased expectations for 2015 Fed rate hike

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The U.S. dollar hit its highest in over five weeks against a basket of major currencies on Friday, a day after Federal Reserve Chair Janet Yellen said she expected the central bank to hike rates in 2015, and after U.S. growth data appeared to support such a move.

In a speech late Thursday, Fed Chair Janet Yellen, who spoke a week after the Fed delayed a long-anticipated rate hike, said she and other Fed policymakers do not expect recent global economic and financial market developments to significantly affect the central bank's policy.

The comments surprised analysts since the Fed kept interest rates unchanged partly in a bow to worries about the global economy, leading some investors to push expectations for a first rate hike in almost a decade into 2016.

"It was a little bit of an about-face by the Fed, and it effectively puts a rate hike by the Fed either next month or in December squarely on the table," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.


Commerce Department data on Friday showed U.S. gross domestic product rose at a 3.9 percent annual pace in the April-June quarter, up from 3.7 percent reported last month.

The data supported the case that the U.S. economy may be gaining enough strength to withstand a rate hike.

The dollar index, which measures the greenback against a basket of six major currencies, hit 96.700 after the GDP data, its highest since Aug. 19, before trading at 96.22. The dollar hit its highest in over two weeks against the Japanese yen of 121.240 yen, before trading at 120.55.

The greenback hit a more than six-week high against the Swiss franc of 0.98420 franc earlier in the session. While the euro fell against the dollar after two straight days of gains, it remained within recent ranges and did not break below a more than two-week low of $1.11050 touched on Sept. 23.

The GDP data "certainly helps the view" of a 2015 Fed rate hike, said Eric Viloria, currency strategist at Wells Fargo Securities in New York.

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The euro was last up 0.17 percent against the dollar at $1.1197. The dollar was up 0.13 percent against the franc at 0.9795 franc.