Friday June 13, 2008 - 09:35:07 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar bolstered by rate outlook, G8 eyed
* Dlr index on course for best week in 3 yrs ahead of G8
* Euro pressured as officials temper rate hike expectations
* All eyes on G8 ministers for clues on FX policy
(Changes dateline, byline, adds quotes, updates prices)
By Simon Falushi
LONDON, June 13 (Reuters) - The dollar rose against the euro
and the yen on Friday, and was on track for its best week in
over three years against a basket of currencies as investors
focused on a weekend meeting of G8 finance ministers.
The U.S. currency benefitted this week as the government and
Federal Reserve took aim at inflation and its impact on the
dollar, raising the prospect of dollar-buying intervention. A
further boost came on Thursday as U.S. retail sales data
surprised on the upside. Click on [ID:nN11255522].
The U.S. currency could derive further support if U.S.
Treasury Secretary Henry Paulson and other finance ministers
attending a Group of Eight finance ministers meeting in Japan
issue dollar-supportive comments.
"If the tone of (the G8) statement is unchanged from the
last meeting when coordinated action was mentioned, this would
give more support to the dollar," said Michael Klawitter,
currency strategist at Dresdner Kleinwort in Frankfurt.
(For ANALYSIS on implications of the G8 meeting on the
currencies, click on [ID:nT167228].)
However Bank of Japan Governor Masaaki Shirakawa said
governments should not single out the impact on forex when
guiding policy [ID:nTKF003210].
The euro has lost around four cents against the dollar since
Monday as European Central Bank board members dampened
expectations for a series of rate hikes after flagging a rise in
By 0852 GMT, the euro was down 0.3 percent at $1.5394
<EUR=>. The dollar index was up 0.2 percent at 73.959, up more
than 2 percent on the week and heading for its biggest weekly
gain since spring 2005 .DXY.
The dollar also edged up to 108.14 yen, its highest in
nearly four months. For the week, the dollar is up 3 percent
against the yen, poised for its biggest weekly gain in four
The Bank of Japan kept interest rates steady at 0.5 percent
on Friday, as widely expected. Market players were also closely
watching the outcome of Ireland's referendum on the European
Union reform treaty, with results expected on Friday.
The rejection of the EU constitution by France and the
Netherlands in 2005 was one factor behind the euro's fall that
year. But analysts are divided on whether the Irish vote will
have much of an impact on the single currency this time.
G8 finance ministers will focus on the global economy and
soaring oil and food prices and while currencies are not
expected to be the chief topic of conversation, ministers are
bound to discuss the impact of rampant oil on the dollar.
The euro dipped briefly after French Economy Minister
Christine Lagarde said on arriving in Japan that the recent
strengthening of the dollar was "satisfying" and that currencies
will be discussed, according to media reports. [ID:nT284996]
Japanese Finance Minister Fukushiro Nukaga said he had
discussed currencies with U.S. Treasury Secretary Paulson.
Paulson said earlier in the week he would never rule out
currency intervention as a potential policy tool to stem the
dollar's slide, giving the U.S. currency a boost.
His comments came after Fed Chairman Ben Bernanke last week
surprised the market with a rare warning that a weak dollar was
adding to price pressures, signalling to investors a shift in
Washington's view on the dollar.
Market players will look to the language of the communique
published at the end of the G8 meeting to gauge the likelihood
of any action from central banks.
"We believe that there could be stronger language on FX in
the communique but it is likely to stop short of indicating that
intervention is likely, which could still be enough to boost the
dollar," said Calyon in a note to clients.
Investors will look to U.S. CPI data at 1230 GMT for more
clues on monetary policy outlook. Annual inflation is expected
to hold at 3.9 percent in May.
(Editing by Gerrard Raven)
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