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Daily Analysis

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Dollar steady as commodities strengthen

Wed, Aug 20 2008, 10:01 GMT
by Benny Menashe

Finotec Group Inc.

The dollar saw stability on Wednesday but was off its recent highs as concerns about the US economy and lifting commodity prices took hold. The Dollar failed to extend gains against the Euro on growing sentiment that the ECB will cut interest rates. It was slightly lower at $1.4764 slightly off its 6 month low of 1.4730 on Tuesday. The Dollar is faring well because there is still concern over economic growth in other countries. The Fed is expected to keep rates unchanged while other central banks are likely to lower interest rates to strengthen their economies.

In London the pound fell to near a two year low against the Dollar on speculation that rising inflation will prompt the BOE to lower interest rates. With the minutes of the monetary policy meeting out today, many will be watching for indicators of future rate cuts. ``We have come to the view there could be one or two votes for a cut,'' said Neil Mellor, a currency strategist at Bank of New York Mellon Corp. in London. ``This could be a new catalyst triggering a new phase of sterling weakness.'' The pound was at $1.8621 by 8:04 a.m. in London, from $1.8671 yesterday.

In Asia the Yen weakened against the dollar and euro on speculation that the Bank of Japan will keep interest rates steady. There is a 1 percent chance the BOJ will reduce borrowing costs to 0.25 percent by the end of September, according to calculations by JPMorgan Chase & Co. The odds for a cut by year-end are 11 percent. The yen was at 110.07 against the U.S. currency at 8:20 a.m. in London, from 109.72 yesterday. The Japanese currency traded at 162.26 per euro from 162.13.

Published on  Wed, Aug 20 2008, 10:05 GMT