FOREX NEWS-Dollar rises, helped by a drop in oil prices
Thu Jun 19, 2008 3:57pm EDT
* Dollar up as crude futures tumble sharply
* China to raise gasoline and diesel prices
* Sterling buoyed by shock jump in UK retail sales
(Adds comments, updates prices, changes byline)
By Vivianne Rodrigues
NEW YORK, June 19 (Reuters) - The dollar rose versus the euro on Thursday, helped by a sharp drop in crude oil prices and a surge in British retail sales that caused traders to offload the European single currency to buy sterling.
May's surprise jump in retail sales raised expectations the Bank of England will raise interest rates, helping to drive the pound to its highest level in over a week against the dollar and spark a rally versus the euro.
"The euro came under a lot of pressure today with investors selling the currency to buy back sterling," said Joe Manimbo, a currency trader at Ruesch International in Washington. "That combined with the sharp drop in oil prices, ended up giving the dollar a boost."
The euro fell as low as $1.5467 <EUR=> in overnight trade. It recovered some losses as data showed factory activity in the U.S. Mid-Atlantic region slowed further in June. For details, see [ID:N19444932].
In late afternoon trading in New York it was down 0.2 percent on the day at $1.5497. The New York Board of Trade's dollar index, which charts the dollar's performance against a basket of six currencies, rose to a session high of 73.594 .DXY. It last traded at 73.482.
Sterling rallied to an intraday peak of $1.9744 <GBP=>. It was up 0.7 percent at $1.9724. The pound also climbed against the euro, pushing the single currency down 0.9 percent to 78.52 pence <EURGBP=>.
"The UK news has sent sterling higher, driving the sterling crosses. That's one of the major undercurrents today. Oil is down, that is also dollar positive," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
"We are still within recent ranges. The dollar is not out of the woods yet."
While the Federal Reserve had turned hawkish due to rising price pressures ignited by record oil prices, analysts believe it is unlikely to raise U.S. interest rates before year-end as the economy remains sickly.
U.S. crude futures tumbled sharply after news that China will raise gasoline and diesel prices. For details, see [ID:nN19403927]. High oil prices have fanned inflation pressures and concerns about their impact on global growth.
A Swiss National Bank decision to leave interest rates unchanged despite inflation at multiyear highs had some psychological effect on the market, but analysts cautioned against reading too much into the move.
There had been suggestions that the Swiss bank's decision could mean the European Central Bank would not tighten policy further after an anticipated rate increase in July.
"While the SNB does not adhere to the inflation-targeting framework of the ECB, both central banks view price stability as being consistent with CPI being below 2.0 percent per annum," said Bank of America in a note.
"Our economists still believe that the SNB's next move will be up, and there is a strong chance that the move could materialize in September."
Against the Swiss franc, the dollar rose 0.9 percent to 1.0459 francs, reversing earlier losses ahead of the SNB decision <CHF=>. The franc also fell 0.7 percent versus the euro to 1.6208 <EURCHF=>. (Additional reporting by Lucia Mutikani; Editing by Richard Satran)
Thomson Reuters journalists are subject to the Editorial Handbook which requires fair presentation and disclosure of relevant interests.
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