Monday March 26, 2007 - 00:21:54 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar extends gains after better US housing data
FOREX-Dollar extends gains after better US housing data
Sun Mar 25, 2007 8:11pm ET17
TOKYO, March 26 (Reuters) - The dollar extended gains against the euro and the pound on Monday following data last week showing a surprise jump in U.S. existing home sales that helped ease worries about a broader economic slowdown.
The 3.9 percent rise in sales of existing U.S. homes in February prompted investors to scale back expectations the Federal Reserve could begin trimming interest rates as soon as June.
Market players ramped up bets for a near-term rate cut last week after the Fed dropped its explicit bias towards tightening monetary policy further after keeping rates on hold at 5.25 percent, driving the euro to a two-year peak against the dollar.
But the Fed said its predominant policy concern remained the risk that inflation stays elevated, stirring some doubts about whether the U.S. central bank is prepared to trim rates just yet.
"February existing home sales data provided further support for the dollar, reinforcing optimism that subprime woes will remain contained, and that persistent inflationary pressures will keep the Fed from cutting rates imminently," currency strategists at BNP Paribas said in a note to clients.
Late on Friday Fed Governor Frederic Mishkin said a determined policy effort is needed to get core inflation back below 2 percent.
The dollar was little changed from late Friday New York trade at around 118.05 yen , recovering from an initial dip to around 117.80 yen in early dealings.
The euro fell to $1.3270 from $1.3283 in late New York trade, pulling further away from the two-year high of $1.3412 struck last week.
The single currency also lost ground to 156.66 yen from 156.90 yen.
The pound dipped to $1.9600 from near $1.9620 and hit a low for the day at $1.9572.
Traders are awaiting the minutes of the Bank of Japan's February meeting at which the central bank lifted rates to a decade-high 0.5 percent from 0.25 percent in an 8-1 vote. The minutes are due out at 0500 GMT.
Germany's IFO survey of business sentiment is due at 0800 GMT and is expected to show a pull-back to 106.5 in March from 107.0 the previous month.
Â© Reuters 2007. All Rights Reserved.
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