Expectation Fed May Raise Rates Faster

The dollar traded near its highest in two weeks against the euro in Asia after Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said a consistent pick-up in inflation ``will require more aggressive policy.'' The president of Fed's New York branch, Timothy Geithner, also said yesterday policy makers would do what is ``necessary to curb inflation,'' a day after Fed Chairman Alan Greenspan suggested he was willing to abandon the bank's commitment to raising rates at a ``measured'' pace. ``Investors are starting to look into the chance the Fed will steer itself toward more aggressive rate increases,'' said Hiroyuki Yamada, who manages $1 billion in overseas debt at Daiwa SB Investments Ltd. in Tokyo. ``That's increasing the dollar's appeal for now because of higher rates'' dollar-denominated debt will offer. Against the euro, the dollar was at $1.2038 at 8:36 a.m. in Tokyo from $1.2049 late yesterday in New York, according to EBS, an electronic foreign-exchange dealing system. It traded as high as $1.2023, the strongest since May 25. The yen may gain against the euro on expectations Japan's machinery orders in April rose for the first time in two months, as a recovery in the world's second-largest economy picks up.