LONDON (AFP) — The dollar rose against the euro and the yen on Wednesday, propped up by lower oil prices and renewed speculation about possible US interest rate hikes, dealers said.
In morning deals, the European single currency dipped to 1.5733 dollars, from 1.5781 dollars late on Tuesday in New York.
Against the Japanese currency, the dollar rose to 107.79 yen from 107.25.
"A fall in oil prices is the main reason for the stronger dollar, along with hawkish comments by the Philadelphia Fed," said Kanako Oikawa, a currency strategist at Traders Securities.
World oil prices have tumbled by 20 dollars since striking record heights above 147 dollars per barrel earlier this month, but remain at elevated levels compared with the start of the year.
"A sustained move lower (in oil prices) would clearly pave the way for central banks globally to ease restrictive monetary stances that would be favourable for the dollar," added economist Derek Halpenny at The Bank of Tokyo-Mitsubishi UFJ in London.
Leading central banks are battling high inflation levels that have been fuelled partly by the soaring cost of crude.
Philadelphia Federal Reserve president Charles Plosser warned in a speech overnight that a rise in US interest rates was unavoidable in the short-term in the face of inflation pressures.
While Plosser is seen as one of the most hawkish members of the Fed's rate-setting committee, his remarks rekindled speculation about possible US rate hikes that could boost the dollar, dealers said.
Investors generally prefer currencies offering higher yields.
The greenback also climbed after Tuesday's solid showing on Wall Street, which staged a late rally on easing worries about high energy costs and renewed interest in the battered financial sector.
Further support stemmed from US Treasury Secretary Henry Paulson, who reiterated Washington's preference for a strong dollar and renewed his backing for troubled US mortgage finance giants Fannie Mae and Freddie Mac.
"The dollar has recovered sharply against nearly all major currencies with reassuring comments from Paulson and hawkish comments from Plosser cited as key factors that triggered the rebound," added Halpenny.
Sterling, meanwhile, rose against the dollar after news that Bank of England policymakers were split three ways over their decision to leave interest rates unchanged earlier this month.
The BoE's nine-member monetary policy committee (MPC) voted 7-2 to leave British borrowing costs at 5.00 percent on July 10, according to minutes from the latest meeting.
Policymaker David Blanchflower voted for a quarter-point cut, while Tim Besley urged the BoE to lift borrowing costs to 5.25 percent.
Economists said the news illustrated how the British central bank was caught between cutting rates to boost economic growth, and lifting them to prevent inflation soaring even higher.
In London morning trade on Wednesday, the euro changed hands at 1.5733 dollars against 1.5781 late on Tuesday, at 169.60 yen (169.27), 0.7901 pounds (0.7923) and 1.6282 Swiss francs (1.6261).
The dollar stood at 107.79 yen (107.25) and 1.0349 Swiss francs (1.0302).
The pound was at 1.9928 dollars (1.9912).
On the London Bullion Market, the price of gold fell to 934.73 dollars per ounce from 961.50 dollars late on Tuesday.
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