Dollar hits 17-mth high as higher U.S. rates seen
TOKYO, Oct 12 - The dollar extended gains on Wednesday, hitting a 17-month high against the yen on reinforced expectations the Federal Reserve will keep raising U.S. interest rates.The dollar also climbed versus sterling to its highest level since late July and nudged closer to a three-month peak hit against the euro last week.The Fed released minutes on Tuesday from its Sept. 20 policy-setting meeting that made clear the central bank’s intention to keep inflation at bay and to continue pushing up the cost of borrowing.
“The minutes were as hawkish as the market had expected, helping the dollar to continue its rally without much of a halt,” said one trader at a Japanese bank.
Fed Governor Donald Kohn was the latest in a slew of top central bank officials to warn of inflation risks when he said late on Tuesday that U.S. core inflation had been “pretty well-behaved”.
He added the Fed had been raising rates to stave off any change in that scenario.
Looming large on the market’s radar was a bevy of top central bank officials due to speak later in the day, including Fed chief Alan Greenspan on economic flexibility and Fed Board Governor Mark Olson on the implications of fiscal policy.
By 0530 GMT, the dollar bought around 114.60 yen, up a tad from levels in late U.S. trade on Tuesday, when it rose 0.4 percent. In early Asian dealing, it rose to a 17-month high around 114.70 yen.
Traders said the dollar would likely stick to its rising trend and could surpass the psychological level of 115 yen this week, though they saw sell orders lined up beneath that number that could stifle the currency’s rise.
A rise above 114.90 yen would take the dollar to a two-year high.
EURO BLUES
The euro was down slightly at $1.1975, creeping back towards a three-month low of $1.1900 hit last week. It fell around 0.7 percent on Tuesday.
The single currency was still smarting from concerns that a coalition pact between Germany’s main parties might dilute reforms in Europe’s largest economy, traders said.
“The euro was bought on hopes for reform. Now that move has reversed,” said Hiroki Shimazu, a market analyst at Mizuho Securities.
The British pound bought $1.7445, down from around $1.7465 in late U.S. trade.
In early Asian trade, it fell to around $1.7420, its lowest level in two and a half months, extending losses on speculation the Bank of England will cut British interest rates further in coming months.
The BOE lowered interest rates for the first time in more than two years in August to 4.5 percent, narrowing sterling’s yield advantage over major currencies.
The key U.S. rate stands at 3.75 percent, compared with 2.0 percent in the euro zone and near zero percent in Japan.
The market shrugged off remarks by BOE Governor Mervyn King on Tuesday that recent British data had been giving conflicting signals and policy-makers needed to keep an open mind about the next move in rates.
Traders were awaiting comments from Bank of Japan Governor Toshihiko Fukui, due at 0630 GMT.
The central bank ended a two-day meeting without adjusting its super-loose monetary policy, as widely expected, though speculation remained rife that it could end the four-year-old policy as early as the first half of next year.
Written by admin on October 12th, 2005 with
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