Friday June 15, 2007 - 19:45:24 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Dollar down vs euro, rises to 4-1/2-yr high vs yen
FOREX-Dollar down vs euro, rises to 4-1/2-yr high vs yen
Fri Jun 15, 2007 3:15 PM ET
(Recasts, updates prices, adds quote)
NEW YORK, June 15 (Reuters) - The dollar slipped against the euro on Friday on tame inflation data, but rallied to a four-and-a-half-year high against the yen after the Bank of Japan indicated it was in no hurry to raise interest rates.
The greenback has reached fresh highs against the yen for the last three days and is on pace for its biggest weekly gain this year.
The euro was up 0.5 percent from late Thursday to $1.3381 following reports showing core consumer prices, which exclude food and energy, rose in May at the slowest pace since March 2006, factory output slowed and consumer confidence dropped more sharply than expected. In intraday trading it was the euro's biggest one-day gain against the dollar since April.
The data has capped a dollar rally that has been largely fueled by U.S. Treasury yields climbing this week to five-year highs, which outpaced the rise in yields of other major government debt. For more on Treasuries, click on [ID:nN15264746.
"Bond yield developments have been driving other markets for the past week or so, and an easing in yields should equate to a softer dollar," said Nick Bennenbroek, head of currency strategy with Wells Fargo in New York.
Over the past month, data has hinted at a rebound in U.S. growth, and traders of interest rate futures priced out expectations of an interest rate cut by the Federal Reserve. In March, dealers priced in nearly three quarters of a percent in cuts.
Despite Friday's pullback in the dollar, many analysts anticipated strength in the currency next week.
"With a marginal improvement in the U.S. interest rate picture, we will need to get back below 5 percent on the 10-year (Treasury note) before people will think the dollar will get weaker," said Joe McCarthy, head of foreign exchange trading at ING Capital Markets in New York.
Against the yen, the dollar rose to a high of 123.66 yen before surrendering some gains to trade at 123.43, 0.4 percent above its level late Thursday.
Japan's interest rates, which at 0.5 percent are the lowest in the developed world, continue to weigh on the yen, especially after the Japanese central bank ended a policy meeting with no clear signals of a forthcoming rate increase.
The euro touched a record high of 165.27 yen, according to electronic platform EBS . The euro later surrendered some gains to trade at 165.14 yen, still up 1 percent on the day.
Though currency investors continue to be focused primarily on milking yield out of differences in interest rates between various currencies, data released on Friday showed a long-term weakness in the dollar has improved somewhat.
A report showed the U.S. current account deficit widened in the first quarter but by less than expected to $192.58 billion from $187.94 billion in the fourth quarter of last year.
Also, the deficit for 2006 was revised down by $45 billion to $811.48 billion.
While still massive -- the 2006 shortfall was equal to 6.1 percent of U.S. gross domestic product -- the current account gap appeared to be stabilizing below $200 billion on a quarterly basis.
Also, a separate report showed long-term net capital flows into the United States rose in April to $84.1 billion, the highest since January, driven by record net foreign purchases of U.S. stocks by private investors.
Â© Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."