Tuesday March 22, 2005 - 08:19:58 GMT
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ACM REFCO - www.ac-markets.com
FX Daily Technical Strategy
Dollar firm ahead of Fed policy meeting
The dollar stayed in sight of two-week highs against the euro and the yen on Tuesday ahead of a Federal Reserve meeting that could point to interest rates rising at a faster pace in the future.
At the meeting, due to start at 1400 GMT, Fed policy makers are widely expected to raise the federal funds rate by 25 basis points to 2.75 percent, which would be the seventh straight rate increase since June 2004 and will be boosting the yield on the dollar.
Given concerns about rising inflation, especially with oil prices climbing to fresh record highs last week, some traders expected the Fed to indicate in its post-discussion report that it would shift to an accelerated pace of tightening.
Some dealers, however, said that any gains for the dollar would likely be fleeting.
the U.S. currency would likely run into stiff resistance at around 105.50 yen and $1.3100 per euro.
The dollar has rebounded around 2.6 percent against the yen and three percent versus the euro since the start of the year, clawing back after a three-year decline fuelled by worries about the large and growing U.S. trade and budget deficits.
By 0555 GMT, the dollar fetched around 105.10 yen, down slightly on the day but in sight of a two-week high of 105.50 yen struck on Monday.
The euro was little changed at around $1.3160. It fell as low as $1.3140 on Monday, its lowest level since March 4.
The single European currency is now about four percent below a record high of around $1.3670 struck in late December.
MEASURED, OR NOT
Dealers said that although the dollar could get a boost from the removal of the term "measured" in the Fed report, the currency was unlikely to lose much ground if the current wording is kept.
They said the dollar could gain support from U.S. consumer price data for February due on Wednesday, given that any jump in inflation could force the Fed into a quicker pace of rate rises.
With Americans facing higher oil prices, 36 Wall Street analysts and economists polled by Reuters forecast a 0.3-percent gain in the government's consumer price index, compared with a milder 0.1 percent uptick in January.
Traders said the dollar was helped by speculators such as hedge funds
@09h30 GMT: GB February CPI
@13h30 GMT: US February PPI
@19h15 GMT: US FOMC rate decision
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