US Dollar rises to multi month highs vs euro, yen
The dollar hit a nine-month high against the euro and an eight-month peak versus the yen on Monday, extending gains after U.S. data and comments from Fed chief Alan Greenspan raised prospects for more interest rate hikes.
Following last week's better-than-expected U.S. trade data and Greenspan's comments that the economy was on a "firm footing", the market is looking to see if this week's figures would reinforce expectations of higher U.S. rates.
The euro had fallen to $1.2036, its lowest level since early September 2004, before pushing back to $1.2060 by 1200 GMT to stand at 0.5 percent down on the day.
The dollar also rose more than half a percent against the yen and hit its highest level in eight months at 109.47, after rallying 1.2 percent on Friday in its biggest daily gain in more than four months.
Data showed the Japanese economy grew less briskly than originally estimated in the first three months of 2005, expanding by 1.2 percent compared to the original estimates of 1.3 percent.
Finance ministers from the world's rich nations (G8) during their weekend meeting in London kept up pressure on China to move towards more flexible exchange rates, but produced no clues as to the timing.
Sticking to tradition, G8 did not mention currency issues in its communique as central bankers from the group did not attend the meetings.
Higher interest rates and the relatively lucrative yields on U.S. deposits have helped the dollar rise more than 10 percent against the euro so far this year.
More rate hikes are expected as soon as at the Federal Reserve's next policy meeting on June 29-30. Another quarter-point hike then would be the Fed's ninth straight and it would take the funds rate to 3.25 percent.
In contrast, the euro zone's sluggish economy is raising expectations that the European Central Bank's next move may be an interest rate cut.
A weekend interview given by ECB Chief Economist Otmar Issing added fuel to these expectations after he said risks to price stability had decreased. The central bank has kept rates at 2 percent since June 2003.
The outlook for higher U.S. interest rates has attracted foreign capital into the country, offsetting concerns about the huge U.S. current account deficit.
U.S. April capital flows data, due on Wednesday, could add to evidence the United States is comfortably financing its trade deficit.
U.S. producer and consumer price indices, due on Tuesday and Wednesday separately, are expected to give clues for any signs of an uptick in prices, which could lead the Fed to raise rates at an even faster pace to ward off inflation.
The week will also see European Union leaders debating the future of the bloc's political and monetary integration after France and the Netherlands voted "no" to the EU constitution.
Following last week's better-than-expected U.S. trade data and Greenspan's comments that the economy was on a "firm footing", the market is looking to see if this week's figures would reinforce expectations of higher U.S. rates.
The euro had fallen to $1.2036, its lowest level since early September 2004, before pushing back to $1.2060 by 1200 GMT to stand at 0.5 percent down on the day.
The dollar also rose more than half a percent against the yen and hit its highest level in eight months at 109.47, after rallying 1.2 percent on Friday in its biggest daily gain in more than four months.
Data showed the Japanese economy grew less briskly than originally estimated in the first three months of 2005, expanding by 1.2 percent compared to the original estimates of 1.3 percent.
Finance ministers from the world's rich nations (G8) during their weekend meeting in London kept up pressure on China to move towards more flexible exchange rates, but produced no clues as to the timing.
Sticking to tradition, G8 did not mention currency issues in its communique as central bankers from the group did not attend the meetings.
Higher interest rates and the relatively lucrative yields on U.S. deposits have helped the dollar rise more than 10 percent against the euro so far this year.
More rate hikes are expected as soon as at the Federal Reserve's next policy meeting on June 29-30. Another quarter-point hike then would be the Fed's ninth straight and it would take the funds rate to 3.25 percent.
In contrast, the euro zone's sluggish economy is raising expectations that the European Central Bank's next move may be an interest rate cut.
A weekend interview given by ECB Chief Economist Otmar Issing added fuel to these expectations after he said risks to price stability had decreased. The central bank has kept rates at 2 percent since June 2003.
The outlook for higher U.S. interest rates has attracted foreign capital into the country, offsetting concerns about the huge U.S. current account deficit.
U.S. April capital flows data, due on Wednesday, could add to evidence the United States is comfortably financing its trade deficit.
U.S. producer and consumer price indices, due on Tuesday and Wednesday separately, are expected to give clues for any signs of an uptick in prices, which could lead the Fed to raise rates at an even faster pace to ward off inflation.
The week will also see European Union leaders debating the future of the bloc's political and monetary integration after France and the Netherlands voted "no" to the EU constitution.
posted by Drs Search @ 8:09 AM
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