Wednesday May 14, 2008 - 20:34:18 GMT
Share This Story
Reuters - www.reuters.com
FOREX News-Yen falls broadly after tame CPI data, stocks rise
(Recasts; adds comments, updates prices, changes byline)
* Yen falls broadly as U.S. CPI data boost risk demand
* CPI rises at an unexpectedly slower pace in April
* CPI does not change views Fed on pause
By Vivianne Rodrigues
NEW YORK, May 14 (Reuters) - The yen eased broadly on
Wednesday as a tame U.S. consumer inflation report for April
boosted stocks and raised investor appetite for risk.
The unexpectedly slow increase in the consumer price index
(CPI) briefly caused traders to sell the dollar, but analysts
said it did not alter market views that the Federal Reserve's
cycle of interest rate cuts was almost over.
"The market looked at it as a positive for risky assets,
namely that it takes a little bit of stress off the inflation
outlook and gives the Federal Reserve more flexibility in terms
of the economic outlook," said Brian Dolan, chief currency
strategist at Forex.com in Bedminster, New Jersey.
The dollar jumped to a session high of 105.44 yen <JPY=>,
with Wall Street stocks surging as inflation worries eased. The
greenback last traded at 105.02 yen, up 0.2 percent on the
"Higher U.S. stocks certainly did help push the yen down
across the board," said Joe Manimbo, a currency trader at
Ruesch International in Washington.
The euro gained 0.3 percent to 162.42 yen <EURJPY=> while
the Canadian dollar soared 0.6 percent to 104.89 yen
RISK APPETITE BACK
"The more benign CPI also led to bonds getting bought back,
bringing yields down. That's what drove the dollar/yen rate and
we're looking at stocks pricing higher, bringing back risk
appetite," said Forex.com's Dolan.
Consumer prices rose by 0.2 percent in April, slightly less
than the 0.3 percent gain forecast by market analysts. CPI rose
0.3 percent in March.
The dollar erased earlier gains against the euro in what
analysts called a kneejerk reaction to the CPI report. The euro
was last trading at $1.5460, flat on the day, but off earlier
troughs at $1.5397.
It briefly rose to a session high of $1.5486 <EUR=>.
Speculation the Fed is done with cutting borrowing costs,
having slashed its key lending rate by 325 basis points to 2
percent since mid-September, has supported the dollar and
analysts said this view had not changed.
U.S. interest rate futures showed the Fed would raise the
benchmark federal funds rate by a quarter-percentage point by
year-end to 2.25 percent. They priced in a 92 percent chance
that the central bank would leave rates unchanged next month.
Analysts expected the euro's advance against the dollar to
remain relatively muted during the session.
"The euro is carving out a top. We ran out of steam earlier
this week at 1.5570. It looks like we are having a broadly
sideways move to the euro. We need to get 1.5570 in order to
signal a move to 1.57," said Marc Chandler, senior currency
strategist at Brown Brothers Harriman in New York.
Sterling slumped to a near three-month low against the
dollar after the Bank of England, in its quarterly inflation
report, said British prices would shoot up this year, which
many believe may delay interest rate cuts.
If British inflation continues to heat up, this will have a
negative impact on the broader economy while keeping the
central bank wary of cutting rates, which often promotes
growth. Sterling last traded flat at $1.9946 <GBP=>.
(Additional reporting by Lucia Mutikani in New York. Editing
by Gary Crosse)
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."