The US Dollar Index struck a 3-week peak after several officials from the US Federal Reserve Bank touted an economic scenario that would eventually result in additional interest rate increases. Collectively, their outlook includes improved wages which would push inflation higher. On Monday, William Dudley said he expected some tightening in the US labor market, and that the recent soft data was only temporal; his viewpoint appears to side with the majority of voting members of the FOMC. On the opposite side, Charles Evans believes that the Fed should wait until the year’s end before considering another rate hike.

As reported at 10:51 am (BST) in London, the US Dollar Index was trading at 97.552. DXY, a gain of 0.22%; the Index had earlier hit a peak of 97.623 .DXY. Investors use the Dollar Index to gauge the relative strength of the greenback against six major rivals. The GBP/USD was lower at $1.2698, down 0.38%. The EUR/USD was trading at $1.1157, up 0.06%; earlier the pair had hit a low of $1.11401, while the session peak stands at $1.11654.

USD/JPY Long Term Outlook Favorable

Analysts say that the Dollar is likely to appreciate, especially versus the Japanese Yen, over the long term. The Bank of Japan indicated that it doesn’t intend to scale back the massive amount of Quantitative Easing it has long embarked upon. In the short term, analysts point out that Dollar bulls would need to be wary of further weakness in US inflation. The USD/JPY was trading at 111.54 Yen, down 0.03% and off the session low of 111.509 Yen.