Dollar firms against euro on hope for US rate hike

NEW YORK, Aug 30 , (AFP) The dollar firmed against the euro yesterday, bolstered by rising US inflation that stirred speculation the Federal Reserve will raise interest rates. brThe euro was changing hands at 1.4673 dollars around 2100 GMT, down from 1.4708 dollars late Thursday. brHowever, the dollar slipped against the Japanese currency, falling to 108.75 yen from 109.47 yen. brThe dollar was boosted by a Commerce Department report showing inflation rose to an annual 4.5 per cent in July, the highest rate since February 1991. brElevated inflation could encourage the Fed to raise its key base rate, analysts said. The central bank has held the federal funds rate at a low 2.0 per cent for two straight policy sessions as it focuses on sluggish economic growth. brThe dollar continued to benefit from Thursday's sharp upward revision of second-quarter gross domestic product (GDP) growth to a robust 3.3 per cent from an initial estimate of 1.9 per cent. brIn contrast, other major economies, such as the eurozone, Britain and Japan, are struggling with weak growth amid year-old financial market turmoil. brRecent economic data points towards a weakening of real GDP growth in the eurozone economy and a more accommodative monetary policy could be needed to prevent the region from falling into a recession, said Antonio Sousa at Forex Capital Markets. brInflation data for the 15-nation eurozone came off record highs in August, offering a glimmer of light as the threat of recession looms. brAnnual inflation in the eurozone countries fell to 3.8 per cent from a record 4.0 per cent in July as oil prices cooled, according to a first estimate from the Eurostat data agency. brThis ... supports our view that the ECB will eventually cut rates pretty aggressively, although worries over the inflation outlook will keep the bank on hold for some months yet, said Capital Economics analyst Jennifer McKeown. brThe yen rallied against the dollar as inflation in Japan jumped to a decade high, reviving talk of a future interest rate hike there, dealers said. brIn late New York trade, the dollar rose to 1.1007 Swiss francs from 1.0991 late Thursday. brThe pound was at 1.8218 dollars, down from 1.8285.