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Dollar continues to advance against the majors ahead of fed rate

Tue, Aug 5 2008, 12:27 GMT
by Benny Menashe

Finotec Group Inc.

The dollar rose toward a six-week high against the euro before a Federal Reserve meeting today at which policy makers may leave interest rates on hold and highlight concern about inflation. The U.S. currency also climbed to a six-week high versus the British pound after crude oil fell to $119 a barrel, adding to optimism that lower fuel prices will help sustain growth in the world's biggest economy. ``The Fed cannot be dovish on inflation risks,'' said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``The dollar is also getting a boost from falling oil prices, easing concern over U.S. consumption.'' The EUR/USD is currently trading at $1.5528 as of 7:25 am, GMT.

Current U.S inflation which is the fastest inflation in 17 years adds to the risk that the three members of the Federal Open Market Committee will dissent for the first time since 1992. ``Bernanke and Kohn would struggle like heck to make sure there were not three dissents,'' said Wachovia Corp. Chief Economist John Silvia, referring to Fed Vice Chairman Donald Kohn. ``They would probably be biased in their statement to really be focused more on inflation.'' Ten officials will decide the price of money today: Four are district-bank leaders that rotate into voting slots each year, joining five Washington-based governors. The New York Fed president has a permanent slot as the FOMC's vice chairman and tends to back the chairman.

The pound fell to its lowest level in a week against the euro yesterday and near its weakest in a month against the dollar after a report showed the U.K. construction industry, which accounts for 6 percent of the economy, shrank at the fastest pace in 11 years. The pound will weaken to $1.90 and to 80 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg. The GBP/USD is currently trading at $1.9580 as of 7:44 am, GMT.

Today's Economic Events

Published on  Tue, Aug 5 2008, 12:49 GMT

Archive

• The UK may cut the interest rate after negative quarter
  Published On Tue, Oct 7 2008, 13:55 GMT
• The Euro falls as the Europe braces for the crunch
  Published On Mon, Oct 6 2008, 11:42 GMT
• Dollar down before employment data releases
  Published On Fri, Oct 3 2008, 11:12 GMT
• Dollar up on Bailout Plan approval
  Published On Thu, Oct 2 2008, 11:07 GMT
• The Dollar up against euro and sterling
  Published On Mon, Sep 29 2008, 11:44 GMT

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