Wednesday May 21, 2008 - 11:30:25 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Euro at 1-month high vs dlr, stg; Ifo fans ECB hike talk
(Changes byline, adds comment, updates prices)
By Toni Vorobyova
LONDON, May 21 (Reuters) - The euro hit one month highs
versus the dollar and sterling on Wednesday after a surprise
improvement in German business sentiment added to talk that the
next move in euro zone interest rates may be up rather than
The speculation started on Tuesday after ZEW president
Wolfgang Franz said he expects the European Central Bank to
tighten policy soon from the current 4 percent.
His comments were supported by higher than expected German
producer price inflation and on Wednesday a surprise rise in the
Ifo business sentiment index.
"The Ifo showed that the ECB is still in a position to make
a move (up in rates) if it needs to do so," said Simon Derrick,
head of currency research at Bank of New York Mellon.
"That's what people are looking for -- a central bank that
is concerned more about inflation than anything else and has the
flexibility to be able to deal with it should the need arise.
And on both those counts the euro wins."
The euro rose as high as $1.5767 <EUR=> and 80.17 pence
<EURGBP=> -- levels not seen since April 24. It also hit a
three-week high at 163.15 yen <EURJPY=>.
The Ifo economic institute's business climate index came in
at 103.5 in May, far exceeding forecasts for a dip to 102.0.
The euro's rally -- as well as a rise in oil prices to fresh
record highs [O/R] -- dragged the dollar down to a one-month low
against a basket of six major currencies, at 72.040 .DXY.
In contrast to burgeoning speculation of an ECB rate hike,
bets on a Federal Reserve tightening before the end of the year
have faded over the last few days, in part thanks to comments
from vice chairman Donald Kohn on Tuesday.
Kohn said U.S. rates seem to be at the right level for now,
but there was much uncertainty about the future outlook.
"His rhetoric dovetails with our view that the Fed is likely
not committed at all to any specific course for interest rate
policy in coming months," Saxo Bank said in a research note.
"This and the lower than expected (headline U.S.) PPI
release yesterday were dollar bearish as more hawkish
expectations have been creeping into the forward expectations."
Investors will also take a careful look at the minutes of
the Fed's policy meeting on April 29-30 due at 1800 GMT.
The Fed has slashed rates by 3.25 percentage points to 2
percent since last September as a crisis in the housing and
credit markets slowed the economy. Many now think the easing
cycle is over, even if rate hikes are not yet on the cards.
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."