The US Federal Reserve chair Janet Yellen has said a rate hike could be "appropriate relatively soon".

The US Dollar Index climbed to its highest level in several years– 101.10 – this morning following Fed chairwoman Janet Yellen’s speech last night. She addressed the importance of central bank independence and that an increase in interest rates could become appropriate relatively soon, reinforcing the market’s expectation for a 25 bps rate hike in Dec 13-14. The Fed fund futures show that the likelihood of a Dec hike now stands at 96%.

USD/JPY shot up to 110.18, a level that not seen since May 16. The immediate support and resistance levels for USD/JPY can be found at around 109.20 and 111.40 respectively.

Separately, US unemployment claims data dropped to a record low 232k, suggesting a further strengthening in the jobs market. The Housing starts rose to 1.32 million from 1.04 million a month ago, beating a consensus of 1.15 million. Good economic data fueled the rally in the US equity market, with the Dow Jones hitting historical highs at 18,903 points.

The greatest uncertainties, namely the election and the Fed rate hike, were significantly reduced over the last two weeks, which gave the market a good reason to refocus on the fundamentals of economic and corporate earnings.

USD/JPY

 

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