Thursday June 19, 2008 - 09:18:40 GMT
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Reuters - www.reuters.com
FOREX NEWS - Dlr rallies at Swissie's expense, sterling boosted
* Dlr rallies broadly from 1-wk lows after SNB stands pat
* Sterling boosted by surprise jump in UK retail sales
* Overall dlr sentiment still clouded by rate outlook
(Changes dateline, byline, adds quotes, updates prices)
By Veronica Brown
LONDON, June 19 (Reuters) - The dollar rallied broadly on
Thursday, benefitting as the Swiss National Bank's decision to
to keep its interest rates on hold stalled the Swiss franc's
Sterling was boosted after an unexpectedly robust reading of
British retail sales, which conflicted with an overall picture
of a sharply slowing British economy.
Rising money market rates and growing inflationary pressures
had led a significant minority of investors to expect a SNB rate
rise from 2.75 percent, taking the Swissie to a 17-year high
against the yen overnight, but the rally fizzled out as the bank
declined to act.
The SNB held rates for a third successive quarter and said
the medium term price outlook still allowed for unchanged
policy, adding that all signs pointed to current inflation being
Analysts said that investors might see the SNB decision as a
reason to scale back expectations for European Central Bank rate
rises after an expected increase in July.
"The SNB faces the same sorts of difficulties that central
banks in the rest of the developed world seem to be facing, with
regards to inflation pressure building and the global growth
picture looking less certain," BNP Paribas senior currency
strategist Ian Stannard said.
"Traditionally the SNB has liked to lead the ECB so there
might be some scaling back of market expectations for the
ECB...Interestingly, we've seen even some of the more hawkish
members of the ECB dampen down expectations further out in the
year," he added.
The dollar's outlook was still clouded however, with poor
economic data and continued worries about general economic
health in the wake of a global credit crunch injecting doubt
into expectations for a near-term U.S. interest rate rise from
the current 2 percent.
As of Wednesday, U.S. short-term interest rate futures
showed a 48 percent chance of the Fed raising rates by 25 basis
points in August, down from 90 percent earlier this week.
By 0845 GMT, the dollar was up 0.1 percent on the day versus
a basket of six major currencies .DXY, having earlier hit a
one-week low at 73.205.
Against the Swiss franc, the dollar rose 0.5 percent to
1.0422 francs, reversing earlier losses made in the run up to
the SNB decision <CHF=>. The franc also fell a third of a
percent versus the euro <EURCHF=>.
The franc had hit a 17-year high of 104.29 yen <CHFJPY=R>
The euro eased 0.1 percent to $1.5510 <EUR=> and fell to
167.22 yen <EURJPY=R>, but stayed within sight of an 11-month
high hit on Wednesday.
UK RETAIL SHOCKER
Sterling jumped after a surprisingly strong reading of
British retail sales highlighted inflationary pressure.
The Office for National Statistics said sales surged 3.5
percent last month, putting them up 8.1 percent on the year. The
annual rate was the strongest since April 2002 [nONS003577].
The figures were much stronger than forecasts for a monthly
fall of 0.1 percent for an annual rise of 4.1 percent.
"The (numbers) came out very strong, surprisingly so, a
massive jump in the headline and pretty much across the board
and we see a particular strength in clothing and footwear," said
Daragh Maher, senior currency strategist at Calyon.
"For now sterling bounces on it. But in terms of its meaning
for policy, I think they (the Bank of England) would want to see
a confirmation that this isn't some weird aberration."
Sterling rallied to a one-week high of $1.9715 <GBP=>, up
more than half a percent on the day. It had traded at $1.9629
before the announcement.
It also climbed against the euro, pushing the single
currency down roughly 0.7 percent to 78.70 pence <EURGBP=>.
(Additional reporting by Naomi Tajitsu and Bate Felix)
(Reporting by Veronica Brown; Editing by Gerrard Raven)
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