Dollar mixed ahead of US rate decision
Wednesday, 6 August 2008
TOKYO, Aug 5 (AFP): The dollar was mixed in Asian trade today as traders took to the sidelines ahead of a US Federal Reserve meeting, waiting for any hints of future interest rate rises, dealers said.
The dollar slipped to 108.10 yen in Tokyo afternoon trade from 108.25 in New York late Monday. The euro eased to 1.5541 dollars from 1.5580 and to 167.97 yen from 168.65.
With the Fed widely expected to leave its benchmark rate at 2.0 per cent later Tuesday, dealers were expected to focus on the accompanying statement by the US central bank for clues on the policy outlook.
"The focus of the market is on prospects of a future rate hike," said Kanako Oikawa, senior currency strategist at Traders Securities, adding that recent US data suggests inflation is rising too fast for the Fed's comfort.
"If there's any word suggesting a rate hike in the Fed's statement, the dollar will rise," she said.
The Fed worries that if it keeps rates low then inflation could keep rising, but if it acts too soon economic growth could suffer, dealers said.
"Dovish remarks (from the Fed) will likely prompt players to sell the dollar again," Keiichi Iguchi, a dealer at Resona Bank, told Dow Jones Newswires.
"The key is whether the Fed regards recent drops in energy and commodity prices as a temporary phenomenon," he said.
The greenback has fallen heavily against the euro over the past year because investors tend to prefer currencies offering higher yields.
The European Central Bank is expected to keep official borrowing costs at 4.25 per cent Thursday amid concerns about record inflation coupled with sluggish economic growth in the eurozone.
Dealers said a decline in oil prices was helping to prop up the dollar, although traders were not actively buying ahead of the Fed decision.
The Australian dollar fell sharply after the central bank left interest rates unchanged Tuesday at a 12-year high of 7.25 per cent but flagged a possible cut to bolster the economy, dealers said.
Against Asian currencies, the dollar edged up to 1.3742 Singapore dollars from 1.3701 on Monday, to 1,017.75 South Korean won from 1,017.40, to 30.75 Taiwan dollars from 30.71, and to 33.63 Thai baht from 33.54.
But it slipped to 9,077.00 Indonesian rupiah from 9,097.00, and to 44.13 Philippine pesos from 44.47.
The dollar slipped to 108.10 yen in Tokyo afternoon trade from 108.25 in New York late Monday. The euro eased to 1.5541 dollars from 1.5580 and to 167.97 yen from 168.65.
With the Fed widely expected to leave its benchmark rate at 2.0 per cent later Tuesday, dealers were expected to focus on the accompanying statement by the US central bank for clues on the policy outlook.
"The focus of the market is on prospects of a future rate hike," said Kanako Oikawa, senior currency strategist at Traders Securities, adding that recent US data suggests inflation is rising too fast for the Fed's comfort.
"If there's any word suggesting a rate hike in the Fed's statement, the dollar will rise," she said.
The Fed worries that if it keeps rates low then inflation could keep rising, but if it acts too soon economic growth could suffer, dealers said.
"Dovish remarks (from the Fed) will likely prompt players to sell the dollar again," Keiichi Iguchi, a dealer at Resona Bank, told Dow Jones Newswires.
"The key is whether the Fed regards recent drops in energy and commodity prices as a temporary phenomenon," he said.
The greenback has fallen heavily against the euro over the past year because investors tend to prefer currencies offering higher yields.
The European Central Bank is expected to keep official borrowing costs at 4.25 per cent Thursday amid concerns about record inflation coupled with sluggish economic growth in the eurozone.
Dealers said a decline in oil prices was helping to prop up the dollar, although traders were not actively buying ahead of the Fed decision.
The Australian dollar fell sharply after the central bank left interest rates unchanged Tuesday at a 12-year high of 7.25 per cent but flagged a possible cut to bolster the economy, dealers said.
Against Asian currencies, the dollar edged up to 1.3742 Singapore dollars from 1.3701 on Monday, to 1,017.75 South Korean won from 1,017.40, to 30.75 Taiwan dollars from 30.71, and to 33.63 Thai baht from 33.54.
But it slipped to 9,077.00 Indonesian rupiah from 9,097.00, and to 44.13 Philippine pesos from 44.47.