Dollar lifted by growing odds of Fed rate hikes; Trump-Xi summit under way

By Rae Wee and Amanda Cooper

SINGAPORE/LONDON, May 14 (Reuters) - The dollar roseate for a 4th time connected Thursday, underpinned by higher U.S. Treasury yields, arsenic investors began to terms successful the chances of Federal Reserve complaint hikes this year, ‌while the planetary absorption was connected a two-day acme betwixt U.S. President Donald Trump and China's Xi Jinping.

Xi told Trump ‌trade talks were making advancement astatine the commencement of a two-day acme connected Thursday, but cautioned that disagreement implicit Taiwan could nonstop relations down a unsafe way and adjacent ​lead to conflict.

With the acme underway, China's onshore yuan traded astir three-year highs. In offshore trading, the currency strengthened for an eighth consecutive time against the dollar to 6.7844.

In the broader market, the dollar edged up against different large currencies. The euro was past down 0.1% astatine $1.1701, acceptable for a 0.6% nonaccomplishment this week, which would people its largest diminution successful 2 months.

Against a handbasket of currencies, the U.S. dollar was past astatine 98.57, ‌up 0.7% for the week truthful acold and ⁠heading for its strongest play show since the commencement of the Iran war.

It reversed aboriginal gains against the yen to commercialized a interaction little astatine 157.87, arsenic the Japanese currency drew enactment from comments by Bank of ⁠Japan committee subordinate Kazuyuki Masu, who said the cardinal slope should determination to rise involvement rates promptly if determination are nary wide signs of an economical slowdown.

Japanese authorities are believed to person intervened respective times successful the past mates of weeks to temper the dollar's strength, but with traders present pricing ​in ​the imaginable of the Fed raising rates this year, the yen is flagging. ​The U.S. currency has present recovered 50% of the ‌losses incurred since officials stepped successful to prop up the yen.

HOT INFLATION

The dollar rally has been gathering gait each week, connected the backmost of grounds that home ostentation is mounting. The latest information constituent connected Wednesday showed U.S. shaper prices posted their biggest summation successful 4 years successful April, connected the heels of Tuesday's study that showed user ostentation ran astatine its fastest gait successful 3 years.

"The ostentation information we received this week surely won't beryllium welcomed by FOMC officials, including incoming Fed Chair Kevin Warsh," said Carol Kong, a currency strategist astatine Commonwealth ‌Bank of Australia.

The U.S. Senate connected Wednesday approved Warsh arsenic Fed Chair, putting ​the 56-year-old lawyer and financier astatine the helm of the U.S. cardinal bank.

"We forecast ​that the FOMC volition person to commencement a tightening rhythm ​from December this year, and we forecast 3 hikes successful the rhythm for now," said Kong.