Euro inches up with all eyes on ECB
Thursday, 7 June 2007
TOKYO, June 6 (AFP): The euro inched up in Asian trade today as the market waited to see how high the European Central Bank might raise interest rates in the coming months to curb inflation, dealers said.
The euro firmed to 1.3527 dollars in Tokyo afternoon trade from 1.3519 in New York late Tuesday. The euro inched up to 164.13 yen from 164.11.
The dollar was flat at 121.37 yen.
The single currency had hit an all-time high of 164.60 yen Tuesday on the eve of the European Central Bank's meeting Wednesday when it is widely expected to increase its benchmark lending rate by 25 basis points to 4.0 per cent.
Market players were waiting for ECB chief Jean-Claude Trichet's press conference for possible hawkish remarks that would fuel speculation of a further interest rate rise to 4.25 per cent in the coming months, dealers said.
"At least a quarter of the market has already priced in a rate rise to 4.25 per cent and a growing number of investors are even speculating about an increase to 4.5 per cent," said Commerz Bank treasurer Ryohei Muramatsu.
An ECB rate hike this week would be the eighth since December 2005, taking the benchmark eurozone lending rate to its highest level since September 2001.
GFT senior analyst Ian Copsey said recent statements from the ECB had been consistently hawkish and the chances that the market will price in another quarter per centage point hike in August were very high.
Dealers were also mulling comments from US Federal Reserve chairman Ben Bernanke who predicted Tuesday that the US economy would advance "at a moderate pace" in the coming quarters, with the housing market slowdown likely to remain a drag on growth for longer than previously expected.
The euro firmed to 1.3527 dollars in Tokyo afternoon trade from 1.3519 in New York late Tuesday. The euro inched up to 164.13 yen from 164.11.
The dollar was flat at 121.37 yen.
The single currency had hit an all-time high of 164.60 yen Tuesday on the eve of the European Central Bank's meeting Wednesday when it is widely expected to increase its benchmark lending rate by 25 basis points to 4.0 per cent.
Market players were waiting for ECB chief Jean-Claude Trichet's press conference for possible hawkish remarks that would fuel speculation of a further interest rate rise to 4.25 per cent in the coming months, dealers said.
"At least a quarter of the market has already priced in a rate rise to 4.25 per cent and a growing number of investors are even speculating about an increase to 4.5 per cent," said Commerz Bank treasurer Ryohei Muramatsu.
An ECB rate hike this week would be the eighth since December 2005, taking the benchmark eurozone lending rate to its highest level since September 2001.
GFT senior analyst Ian Copsey said recent statements from the ECB had been consistently hawkish and the chances that the market will price in another quarter per centage point hike in August were very high.
Dealers were also mulling comments from US Federal Reserve chairman Ben Bernanke who predicted Tuesday that the US economy would advance "at a moderate pace" in the coming quarters, with the housing market slowdown likely to remain a drag on growth for longer than previously expected.