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The Dollar may decline further this week on Fed decision

Tue, Jun 24 2008, 06:10 GMT
by Benny Menashe

Finotec Group Inc.

The dollar fell broadly on Friday as fears of further write-downs in the U.S. financial sector raised speculation the Federal Reserve would not signal a shift toward tighter monetary policy when it meets next week. Rising oil prices, more inflation-busting talk from a European Central Bank official and an unexpected surge in German producer prices in May to a near two-year high added to selling pressures on the greenback. These developments were seen as confirmation that the European Central Bank would deliver an interest rate hike next month, flagged at the bank's last policy meeting. A hike would further enhance the euro's yield appeal against the dollar.

The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp. The currency has stayed below its 200-day moving average after rising above it from June 13 to June 18 for the first time since August, signaling further losses. The dollar may now fall to the next level of so-called support around 105.72 yen, where an ascending trend-line, connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, extends to, she said.

The pound snapped a three-day gain against the dollar after a report showed U.K. house prices fell in June by the most this year. The pound also dropped against 12 of the 16 most-active currencies as traders reduced bets the Bank of England will raise interest rates to curb inflation. The U.K. currency declined against the euro last week after central bank Deputy Governor John Gieve said property values ``have further to fall'' and the ``shock to expectations appears to be having a wider impact on confidence.'' The U.K. currency fell to $1.9643 by 9:19 a.m. in London, from $1.9761 on June 20. It was little changed at 78.94 pence per euro, after earlier dropping to 79.10 pence.

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Published on  Tue, Jun 24 2008, 06:12 GMT