Thursday June 26, 2008 - 11:49:06 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr extends post-Fed losses; euro/yen hits record high
* Euro up 0.2 pct at $1.5701, after touching 2-week high
* Dollar broadly weaker as FOMC rate hike expectations
* French confidence data briefly knocks euro/dollar
* Euro achieves record high vs battered yen
(Changes dateline, byline, adds quotes, update prices)
By Michael Taylor
LONDON, June 26 (Reuters) - The dollar hit a three-week low
versus a basket of major currencies on Thursday, extending the
previous day's losses after a statement from the Federal Reserve
trimmed expectations for near-term interest rate hike.
The single European currency climbed to a record high
against a broadly weaker yen after European Central Bank
officials on Wednesday warned about persistently high inflation,
cementing expectations the ECB will hike rates next week despite
the weaker sentiment data.
The U.S. central bank held its benchmark fed funds rate
steady at 2 percent, effectively ending one of its most
aggressive rate cutting campaigns to limit the economic fallout
from the housing and credit crisis.
The Fed voiced greater concerns about inflation in the
statement accompanying its two-day policy meeting but also said
it expected price pressures to moderate this year.
"The FOMC statement was viewed as not being quite as hawkish
as some market participants had feared, so that's why the dollar
has a slightly softer tone today," said Robert Minikin, senior
FX Strategist at Standard Chartered.
A Reuters survey, taken shortly after the Fed's rate
verdict, showed all 16 primary dealers polled expect the central
bank to stand pat at its next policy meeting in August [FED/R].
At 1104 GMT the euro was 0.2 percent higher at $1.5703,
having hit a 2-week high earlier at $1.5726. It was briefly
knocked earlier after data showing French consumer confidence
had fallen to its lowest headline level since 1987
[ID:nL26424844] while Italian business morale hit a 3-year low
But expectations for a July ECB hike remained intact after
data from German states pointed to an increase in inflation in
the euro zone's biggest economy.
Euro/dollar has been trapped in a $1.5285-$1.5844 range for
about two months, but some analysts said the near-term outlook
for the pair remained mildly bullish.
"The market is dealing in hard facts and the ECB is very
likely to be raising rates next week and probably still sounding
pretty hawkish even after they've hiked," said Chris Turner,
head of FX strategy at ING in London.
Against the Japanese currency, the dollar was steady at
107.74 yen <JPY=>, while the euro was up 0.1 percent at 169.20
yen, having hit a record high 169.45, according to Reuters data
The Japanese currency has been hurt by expectations the Bank
of Japan will keep interest rates at a low 0.5 percent for a
while due to weakness in the domestic economy.
The yen also slid against other higher-yielding currencies,
with the Australian dollar <AUDJPY=R> hitting seven-month highs
around 103.73 yen, while the Swiss franc hit a 17-year high of
104.59 yen <CHFJPY=R>.
Looking ahead, a final estimate of U.S. first quarter growth
is expected at 1230 GMT. Economists in a Reuters survey expect a
1.0 percent annualised pace of growth compared with a 0.9
percent rate in the second preliminary estimate.
Separate data is seen showing a slight improvement in
existing home sales to 4.93 million annualised units in May from
4.89 million in April.
(Additional reporting by Veronica Brown; editing by Chris
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