Friday April 25, 2008 - 23:52:50 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar cruises toward best month in 2-1/2 years
Fri Apr 25, 2008 4:20pm EDT
(Recasts, updates prices)
NEW YORK, April 25 (Reuters) - The dollar headed for its
best monthly performance in 2-1/2 years against a basket of
major currencies on Friday, boosted by a growing view that the
Federal Reserve may stop cutting interest rates.
U.S. economic data this week showing resilience in some
sectors, such as the labor market, contrasted with a sharp
drop in business sentiment in Germany.
That news, combined with European Central Bank
policy-makers' comments highlighting worries about excess
volatility in foreign-exchange trading, dampened expectations
for a rate hike in the euro zone and hurt the euro.
"It's a major shift in sentiment regarding the outlook of
interest rates and we may see the dollar strengthening until
the next Fed meeting," said Mark Meadows, a market analyst at
Tempus Consulting in Washington.
The perceived odds of the Fed keeping its benchmark
interest rate unchanged at 2.25 percent at its meeting next
week rose to about 26 percent, futures trading shows
FEDWATCH. Just over a week ago, futures were evenly split
between a 25- and a 50-basis-point cut.
Meanwhile, traders are paring bets that the ECB's next
move will be a hike in benchmark interest rates.
"Europe is really not insulated and its economy is
beginning to show signs of a slowdown," Meadows said. "While
most people now believe the Fed is about to end its easing
cycle, a growing number of investors believe the ECB may have
to start cutting rates really soon."
In late trading in New York, the euro was down 0.6 percent
at $1.5598 <EUR=>, after dropping as low as $1.5555 earlier,
a three-week low.
The dollar index, which tracks its performance against a
basket of major currencies, earlier hit a one-month high of
73.030 .DXY. It last traded at 72.818, putting it on track
for its best monthly performance since November 2005 at
The dollar last traded up 0.1 percent at 1.0363 Swiss
francs <CHF=> and it was up 0.2 percent against the Japanese
yen at 104.47 <JPY=>.
The Japanese yen failed to benefit from news that Japanese
core consumer prices rose at their fastest pace in a decade in
The U.S. currency did surrender some gains earlier in the
day after news a cargo ship contracted by the U.S. military
fired at least one shot toward an Iranian boat. For details,
Immediately after the news, the dollar declined sharply
against both the yen and Swiss fran currencies, but then
bounced back as there were no further reports of hostilities.
This week's rally in the dollar may have also led some
investors to sell the currency ahead of the weekend to cash in
profits, traders said.
"After the run in the dollar this week, investors would
rather take the opportunity and sell some of it to book in
some profits ahead of the weekend," said Joe Manimbo, a
currency trader at Ruesch International in Washington.
The dollar had limited reaction to a report showing U.S.
consumer confidence fell for a third straight month, touching
its weakest in more than a quarter century.
In Europe, the Ifo German business sentiment index this
week showed the biggest monthly fall since September 2001 on
Thursday, taking the April headline number to a two-year low.
Together with a soft euro-zone manufacturing survey, the
data knocked the euro off record highs above $1.60 set at the
start of the week.
(Reporting by Nick Olivari and Vivianne Rodrigues; Editing by
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