Friday June 6, 2008 - 09:35:53 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro extends gains after Trichet's rate hike signal
(Changes dateline, adds quotes, comment)
By Simon Falush
LONDON, June 6 (Reuters) - The euro hit a five month high
versus the yen on Friday, and added to hefty gains against the
dollar after European Central Bank President Jean-Claude Trichet
said a rate hike was possible as soon as next month.
Trichet shocked investors on Thursday by saying a number of
policymakers wanted higher interest rates and gave a clear
indication that rates may rise by a quarter-point in July,
sending the euro soaring more than 1 percent against the dollar.
"The story in the last 24 hours has been about the euro
doing well, with the yield outlook making the euro look more
attractive," said Chris Turner, head of FX strategy at ING.
The Trichet comments doused this week's dollar rally, which
gathered pace after Federal Reserve Chairman Ben Bernanke
commented about the impact of dollar weakness on inflation
Analysts said the greenback could come under renewed
pressure if U.S. non-farm payrolls figures at 1230 GMT come out
weaker than expected.
"If the payrolls come in weak the broader dollar recovery
could come to an end, and our forecast is for a below forecast
number," ING's Turner said.
By 0749 GMT, the euro was up 0.1 percent at $1.5601 <EUR=>
just off a high of $1.5617, a sharp rebound from Thursday's
three-week low of $1.5365.
The single currency climbed 0.3 percent to a five-month high
of 165.70 yen <EURJPY=R>, according to Reuters data, as solid
gains in regional stocks spurred carry trades where investors
sell the yen in favour of higher yielding assets.
This week's array of inflation-fighting comments from top
central bankers showed heightened concern about containing the
flare-up of price pressures from soaring oil and food prices,
driving government bond yields higher around the world. Japan's
five-year bond yield struck a 10-month peak on Friday. [JP/]
"Bernanke's comments earlier in the week with respect to the
dollar, suggests that broad valuations on the dollar may be used
as a barometer on whether monetary policy has become too
accommodative," said UBS in a note to clients.
"In the context of Trichet's comments yesterday, monetary
conditions in the G3 are unlikely to become more accommodative
in the near-term."
The yen slid broadly on Thursday after data showing
surprisingly strong U.S. retail sales in May sparked a jump in
Wall Street stocks.
The dollar rose 0.15 percent to 106.06 yen <JPY=>, pushing
back towards a three-month peak of 106.44 yen hit on Thursday.
The Australian dollar gained 0.25 percent to 101.62 yen
The Aussie has gained on expectations the Reserve Bank of
Australia will keep rates on hold at 7.25 percent and could
raise them more as the economy remains resilient to the U.S.
slowdown and inflation is running above the central bank's
(Reporting by Simon Falush; Editing by Malcolm Whittaker)
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