Dollar falls as ECB rate hike expectations mount
Sunday, 29 June 2008
NEW YORK, June 28 (AFP): The dollar weathered fresh losses yesterday, despite a stronger-than-expected snapshot on consumer spending, amid expectations that eurozone interest rates will be hiked next week.
The gap in US and eurozone rates-US rates are considerably lower-has already weighed on the dollar which has also been weakened by lackluster economic growth in the United States.
Traders generally prefer to hold currencies in countries where rates are higher so they can reap higher yields on their investments.
The euro was changing hands at 1.5790 dollars around 2100 GMT, up from 1.5756 late Thursday.
The dollar also fell against the Japanese yen, to 106.11 from 106.73 Thursday.
In late New York trading, the dollar was priced at 1.0185 Swiss francs, down from 1.0236 late Thursday.
The British pound was quoted at 1.9948 dollars, up from 1.9883 a day earlier.
The US currency came under renewed pressure this week after the Federal Reserve brought its rate-cutting campaign to a halt Wednesday as it opted to keep its key base rate pegged at 2.0 per cent in the face of mounting inflation pressures.
The dollar lost ground Friday despite a government report showing that consumer spending rose 0.8 per cent in May, as Americans spent the proceeds of one-off tax rebate checks.
The euro gained Friday as many analysts expect the European Central Bank will raise its benchmark interest rate by a quarter of a point to 4.25 per cent next week to avert a spurt in inflation, largely triggered by rocketing world oil prices.
With the Fed rate currently stuck at 2.00 per cent, a tightening action by the ECB would make the euro even more attractive to investors.
Pressure on ECB policymakers to contain rising prices intensified Friday following a report that German inflation picked up speed in June, jumping to an annual 3.3 per cent clip, the fastest pace since 1993, from 3.0 per cent in May.
The gap in US and eurozone rates-US rates are considerably lower-has already weighed on the dollar which has also been weakened by lackluster economic growth in the United States.
Traders generally prefer to hold currencies in countries where rates are higher so they can reap higher yields on their investments.
The euro was changing hands at 1.5790 dollars around 2100 GMT, up from 1.5756 late Thursday.
The dollar also fell against the Japanese yen, to 106.11 from 106.73 Thursday.
In late New York trading, the dollar was priced at 1.0185 Swiss francs, down from 1.0236 late Thursday.
The British pound was quoted at 1.9948 dollars, up from 1.9883 a day earlier.
The US currency came under renewed pressure this week after the Federal Reserve brought its rate-cutting campaign to a halt Wednesday as it opted to keep its key base rate pegged at 2.0 per cent in the face of mounting inflation pressures.
The dollar lost ground Friday despite a government report showing that consumer spending rose 0.8 per cent in May, as Americans spent the proceeds of one-off tax rebate checks.
The euro gained Friday as many analysts expect the European Central Bank will raise its benchmark interest rate by a quarter of a point to 4.25 per cent next week to avert a spurt in inflation, largely triggered by rocketing world oil prices.
With the Fed rate currently stuck at 2.00 per cent, a tightening action by the ECB would make the euro even more attractive to investors.
Pressure on ECB policymakers to contain rising prices intensified Friday following a report that German inflation picked up speed in June, jumping to an annual 3.3 per cent clip, the fastest pace since 1993, from 3.0 per cent in May.