Monday June 16, 2008 - 09:45:24 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar hits 4-month high vs yen, G8 shrugged off
(Changes dateline, adds comment, updates prices)
* Dollar hits highest vs yen since mid-February
* Speculators take profits on earlier dollar slide
* Potential seen for more comments blasting dollar weakness
By Naomi Tajitsu
LONDON, June 16 (Reuters) - The dollar hit a four-month high
versus the yen on Monday as investors reckoned that officials
may keep pushing for a stronger U.S. currency even after a Group
of Eight communique at the weekend made no mention of its recent
The U.S. currency recovered from an earlier slide after G8
finance ministers, in the absence of central bankers, avoided
commenting on currencies and instead focused on soaring
commodity prices [ID:nSP147143]. But on the sidelines of the
meeting, U.S. Treasury Secretary Henry Paulson repeated that he
backed a strong dollar.
Analysts said markets had not given up on the possibility of
more dollar-friendly statements, given that rising inflation is
seen prompting a U.S. interest rate rise.
Adam Cole, global head of currency strategy at RBC, said he
expected a more united position supporting dollar strength to
come out at a G8 meeting of world leaders in July, when central
bankers will be present.
"I think the issue of the G8 attitude towards the dollar is
still up in the air at the moment and in that sense, the market
has bought the dollar back after the sell-off," he said.
The dollar climbed as high as 108.58 yen <JPY=> on Reuters
data to hit its strongest level since mid-February. At 0826 GMT,
it was up 0.2 percent at 108.32 yen.
The euro slipped as low as $1.5347, before pushing back up
to near the day's high of $1.5437 <EUR=>.
The single currency at one point approached a one-month low
hit on Friday after Irish voters rejected a treaty promoting
closer European Union unity [ID:nL13824515].
But market players doubted that the rejection would have a
sustained impact on the euro since the treaty mainly concerned
the strengthening of political ties and seemed to have fewer
Analysts said the single currency would remain supported on
the possibility that the European Central Bank may lift rates as
early as July due to rising inflation risks.
Growing concern about rising inflation in the euro zone was
highlighted in comments by ECB Executive Board member Gertrude
Tumpel-Gugerell, who on Monday said increasing wage pressures in
the euro zone were producing worrying signs [ID:nWEA9507].
FOCUS ON MONETARY POLICY
The dollar has gained steadily this month, recovering from a
record low scraped against the euro in April.
Helping the currency has been Federal Reserve President Ben
Bernanke, who earlier in the month said that concern was growing
about U.S. inflation, due in part to a weak dollar, fuelling
speculation for a rate rise in the coming months.
The fact that there was no overt opposition to Paulson's
comments of support for a strong dollar could be positive for
the currency, said a trader for a European investment bank in
"It suggests that there is some consensus beneath the
surface, that everyone is willing to cooperate," the trader
said. Whether that will lead to any intervention is another
matter, he added.
The dollar, however, could come under pressure if quarterly
earnings announcements by U.S. investment banks this week
rekindle concerns about the financial sector's losses from the
turmoil in credit markets, traders said.
(Editing by Malcolm Whittaker)
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