Thursday April 20, 2006 - 10:14:24 GMT
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INVESTICA Ltd - www.investica.co.uk
The dollar found support close to 1.2665 against the Swiss currency and rallied back to 1.2750 after the US data before hitting fresh lows around 1.2650 in New York. In choppy trading, the dollar edged back above 1.27 in early Europe on Thursday. The US currency is still heavily over-sold on a short-term view which will increase the potential for at least a limited correction stronger.
The overall reduction in US interest rate expectations will offer further short-term franc protection. Volatility is liable to be a key short-term market feature and the existing yield differentials will still offer some short-term dollar support, especially after the higher than expected core US inflation figure.
Swiss producer prices rose 1.5% in the year to March and the National Bank should remain on track for a further interest rate increase to 1.5% in June. The franc will gain some support in Europe if there are concerted official attempts at restraining the Euro.
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