Dollar Weakens; Fed May Keep Plan for Gradual Rate Increases
Dollar Weakens; Fed May Keep Plan for Gradual Rate Increases
March 22 (Bloomberg) -- The dollar fell against the euro and yen on speculation the Federal Reserve will keep intact a commitment to raise interest rates at a ``measured'' pace, disappointing traders looking for bigger increases.
The dollar is heading for the first quarterly gain in three versus the euro on speculation the Fed will boost its benchmark rate in quarter-point steps as the European Central Bank keeps its rate unchanged. Without a signal the Fed is going to make larger rate increases, the dollar is poised to cede some of its gains, said analysts including Ian Stannard at BNP Paribas SA.
``If we don't see a change to the Fed's assessment of inflation or the language in their statement, the dollar will come under pressure,'' said Stannard, a currency strategist in London at BNP, France's second-biggest bank by assets.
Against the euro, the dollar weakened to $1.3202 at 9:53 a.m. in New York from $1.3157 late yesterday, according to EBS, an electronic currency dealing system. The U.S. currency rose as high as $1.3141 yesterday, the strongest since March 4. It fell today to 104.94 yen from 105.19. The dollar is up 3 percent so far this year against the euro.
The central bank will raise its target rate for overnight loans between banks by a quarter point to 2.75 percent, the seventh increase since June, according to 98 of 105 economists surveyed in a Bloomberg News poll. The ECB has kept its rate at 2 percent since 2003. The Bank of Japan has held rates near zero for almost four years.
Fed policy makers release their decision on interest rates at about 2:15 p.m. Washington time.
Of the 22 so-called primary dealers that trade government debt with the Fed, economists from 13 say policy makers by June will remove the ``measured'' reference in the statement that accompanies rate decisions, based on a Bloomberg survey last week. Three said the Fed may omit the phrase today.
U.S. wholesale prices rose a second straight month in February, a government report showed today. The producer price index rose 0.4 percent, after a 0.3 percent increase in January. The core rate, which excludes food and energy, rose 0.1 percent after a 0.8 percent increase.
``I don't think there's any real call to action for the Fed to take any aggressive move,'' said Michael Malpede, senior currency analyst in Chicago at Refco Group Ltd. ``We've priced in the removal of the measured pace language. You could snap all the way back'' to $1.33 per euro should it be kept, he said. Malpede advises selling dollars above 105 yen.
A U.S. government report tomorrow is expected to show consumer prices climbed 0.3 percent last month, faster than the 0.1 percent increase in January, according to the median estimate of 75 economists in a Bloomberg poll.
``I'm looking for inflation to continue its gradual pace of a pickup, prompting the Fed to extend rate increases well into this year,'' said Tsutomu Soma, a trader of derivatives and currencies in Tokyo at Okasan Securities Co.
The spread between 10-year Treasury notes and German government bonds of similar maturity is near the widest since 2000. The gap was about 80 basis points, up from about 63 at the start of the month and no difference in September. A basis point is 0.01 percentage points.
A French government report today showed consumer spending fell 1 percent in February, the biggest decline in seven months.
``The dollar is going to move higher,'' said John Hazelton, a currency trader at PNC Bank Corp. in Pittsburgh. ``Interest rates are going higher in the U.S. and nowhere else in the world.''
The U.S. currency's advance may accelerate should it breach $1.3080 per euro, a level where preset orders to buy may have been clustered, Soma said. Traders place such orders to limit losses in case their bets go the wrong way.
Last Updated: March 22, 2005 10:02 EST
http://www.bloomberg.com/apps/news?pid=10000101&sid=a1_OVFGbezgg&refer=japan
March 22 (Bloomberg) -- The dollar fell against the euro and yen on speculation the Federal Reserve will keep intact a commitment to raise interest rates at a ``measured'' pace, disappointing traders looking for bigger increases.
The dollar is heading for the first quarterly gain in three versus the euro on speculation the Fed will boost its benchmark rate in quarter-point steps as the European Central Bank keeps its rate unchanged. Without a signal the Fed is going to make larger rate increases, the dollar is poised to cede some of its gains, said analysts including Ian Stannard at BNP Paribas SA.
``If we don't see a change to the Fed's assessment of inflation or the language in their statement, the dollar will come under pressure,'' said Stannard, a currency strategist in London at BNP, France's second-biggest bank by assets.
Against the euro, the dollar weakened to $1.3202 at 9:53 a.m. in New York from $1.3157 late yesterday, according to EBS, an electronic currency dealing system. The U.S. currency rose as high as $1.3141 yesterday, the strongest since March 4. It fell today to 104.94 yen from 105.19. The dollar is up 3 percent so far this year against the euro.
The central bank will raise its target rate for overnight loans between banks by a quarter point to 2.75 percent, the seventh increase since June, according to 98 of 105 economists surveyed in a Bloomberg News poll. The ECB has kept its rate at 2 percent since 2003. The Bank of Japan has held rates near zero for almost four years.
Fed policy makers release their decision on interest rates at about 2:15 p.m. Washington time.
Of the 22 so-called primary dealers that trade government debt with the Fed, economists from 13 say policy makers by June will remove the ``measured'' reference in the statement that accompanies rate decisions, based on a Bloomberg survey last week. Three said the Fed may omit the phrase today.
U.S. wholesale prices rose a second straight month in February, a government report showed today. The producer price index rose 0.4 percent, after a 0.3 percent increase in January. The core rate, which excludes food and energy, rose 0.1 percent after a 0.8 percent increase.
``I don't think there's any real call to action for the Fed to take any aggressive move,'' said Michael Malpede, senior currency analyst in Chicago at Refco Group Ltd. ``We've priced in the removal of the measured pace language. You could snap all the way back'' to $1.33 per euro should it be kept, he said. Malpede advises selling dollars above 105 yen.
A U.S. government report tomorrow is expected to show consumer prices climbed 0.3 percent last month, faster than the 0.1 percent increase in January, according to the median estimate of 75 economists in a Bloomberg poll.
``I'm looking for inflation to continue its gradual pace of a pickup, prompting the Fed to extend rate increases well into this year,'' said Tsutomu Soma, a trader of derivatives and currencies in Tokyo at Okasan Securities Co.
The spread between 10-year Treasury notes and German government bonds of similar maturity is near the widest since 2000. The gap was about 80 basis points, up from about 63 at the start of the month and no difference in September. A basis point is 0.01 percentage points.
A French government report today showed consumer spending fell 1 percent in February, the biggest decline in seven months.
``The dollar is going to move higher,'' said John Hazelton, a currency trader at PNC Bank Corp. in Pittsburgh. ``Interest rates are going higher in the U.S. and nowhere else in the world.''
The U.S. currency's advance may accelerate should it breach $1.3080 per euro, a level where preset orders to buy may have been clustered, Soma said. Traders place such orders to limit losses in case their bets go the wrong way.
Last Updated: March 22, 2005 10:02 EST
http://www.bloomberg.com/apps/news?pid=10000101&sid=a1_OVFGbezgg&refer=japan
posted by JimG at 10:51 AM
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