Dollar slumps on US rate outlook
April 19, 2006
Tokyo - The dollar remained under pressure in Asian trade on Wednesday, hitting a seven-month low against the euro on signs that a series of US interest rate rises is almost at an end, dealers said.
The dollar dropped to ¥117.00 in Tokyo afternoon trade from ¥117.12 in New York late Tuesday.
The euro was at $1.2350 after $1.2347 in New York, though off an earlier high of $1.2368 - levels last seen on 12 September 2005. The European currency eased to ¥144.47 from ¥144.63.
"The dollar weakened on subdued (US) producer inflation data and housing data as well as the Federal Open Market Committee (FOMC) minutes dampening expectations of further interest rate rises in the US," said Yasuhisa Ishida, a senior forex manager at Chuo Mitsui Trust and Banking Company.
The FOMC minutes from the March 27-28 meeting showed that most committee members thought that the end of the tightening process was likely to be near.
The federal funds rate stands at 4.75 percent after 15 consecutive rate hikes since mid-2004.
"Because the dollar lost its sole supporting factor -- widespread interest rate differentials -- the US unit is likely to continue to underperform both against the yen and the euro," Commerzbank treasurer Ryohei Muramatsu said.
Analysts said the dollar was likely to remain under pressure this week with Chinese President Hu Jintao on a closely watched trip to Washington that is expected to be dominated by trade and currency issues.
Dealers are also looking ahead to a meeting of finance ministers from the Group of Seven industrialised nations from Friday in Washington.
Additionally on the calendar is the US consumer price index (CPI) for March, which is expected to rise 0.4 percent after a 0.1 percent gain in February. Core CPI is seen rising 0.2 percent.
"A benign core consumer price index reading for March ... would likely trigger a further decline in US bond yields and additional US dollar weakness," National Australia Bank currency strategists said in a market note.
They said the euro was likely heading to levels around $1.2410 with resistance at $1.2650.
The dollar also fell to 32.398 Taiwan dollars from 32.464 on Tuesday, to 37.7650 Thai baht from 37.945, to 1.5992 Singapore dollars from 1.6031, to 8,973 Indonesian rupiah 8,976 and to 947.6 South Korean won from 953.2.
The dollar was flat at 51.455 Philippine pesos. - AFP
|
|
