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ReturnChina:US Dollar Rebounds on Interest Rate Guess
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PublishDate：
2007-05-14 15:27:00
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BEIJING, May 14 -- The United States dollar extended its rebound from an all-time low against the euro on speculation the difference between US and European benchmark interest rates won't narrow as much as traders expected.
The US currency posted two consecutive weekly gains against the euro for the first time since January after the Federal Reserve held its target rate for overnight lending between banks unchanged and said inflation remained the "predominant" economic concern, Bloomberg News reported on Saturday. The European Central Bank as expected maintained borrowing costs at a 5 1/2-year high while signaling a rate increase in June is likely.
"This week the dollar was bought on interest rates not narrowing as expected," said Matthew Kassel, director of proprietary trading in New York at ING Financial Markets LLC. "Next week we are going to see the dollar sell off on the prospect of lower growth." Kassel forecasts the dollar will fall to US$1.3590 against the euro and 119.40 against the yen by the end of next week.
The dollar rose 0.49 percent to US$1.3524 per euro last week, up from the record low of US$1.3681 set on April 27. The US currency traded at 120.20 yen, compared with 120.18 on May 4. The dollar touched 120.54 yen, the strongest since February 27, when stocks around the world tumbled.
The Fed kept its benchmark interest rate at 5.25 percent for the seventh straight meeting on May 9. Policy makers said in their statement that "economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing."
They added that the economy "seems likely to continue to expand at a moderate pace over coming quarters" and that core inflation remains "somewhat elevated."
A government report will probably show on May 15 that consumer prices excluding food and energy slowed to an annualized rate of 2.4 percent in April from 2.5 percent the previous month, according to the median forecast of 24 economists surveyed by Bloomberg News.
"The data is starting to look less bullish on inflation," said Mark Meadows, a strategist in Washington at currency trader Tempus Consulting Inc. "In the slightly longer term, that's bearish on the dollar."
Source: Shanghai Daily
The US currency posted two consecutive weekly gains against the euro for the first time since January after the Federal Reserve held its target rate for overnight lending between banks unchanged and said inflation remained the "predominant" economic concern, Bloomberg News reported on Saturday. The European Central Bank as expected maintained borrowing costs at a 5 1/2-year high while signaling a rate increase in June is likely.
"This week the dollar was bought on interest rates not narrowing as expected," said Matthew Kassel, director of proprietary trading in New York at ING Financial Markets LLC. "Next week we are going to see the dollar sell off on the prospect of lower growth." Kassel forecasts the dollar will fall to US$1.3590 against the euro and 119.40 against the yen by the end of next week.
The dollar rose 0.49 percent to US$1.3524 per euro last week, up from the record low of US$1.3681 set on April 27. The US currency traded at 120.20 yen, compared with 120.18 on May 4. The dollar touched 120.54 yen, the strongest since February 27, when stocks around the world tumbled.
The Fed kept its benchmark interest rate at 5.25 percent for the seventh straight meeting on May 9. Policy makers said in their statement that "economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing."
They added that the economy "seems likely to continue to expand at a moderate pace over coming quarters" and that core inflation remains "somewhat elevated."
A government report will probably show on May 15 that consumer prices excluding food and energy slowed to an annualized rate of 2.4 percent in April from 2.5 percent the previous month, according to the median forecast of 24 economists surveyed by Bloomberg News.
"The data is starting to look less bullish on inflation," said Mark Meadows, a strategist in Washington at currency trader Tempus Consulting Inc. "In the slightly longer term, that's bearish on the dollar."
Source: Shanghai Daily
