Tuesday July 3, 2007 - 10:59:31 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Sterling hits 26-yr high vs dlr, euro peaks vs yen
FOREX-Sterling hits 26-yr high vs dlr, euro peaks vs yen
Tue Jul 3, 2007 6:49 AM ET
(Changes byline, updates prices, adds quotes)
By Veronica Brown
LONDON, July 3 (Reuters) - Sterling hit its highest level in a quarter of a century versus a broadly ailing dollar on Tuesday, and the euro hit a record peak against the low-yielding yen as investors shopped for currencies with attractive yields.
The dollar stayed fairly close to record troughs against the euro with lingering worries about the U.S. housing sector backing views that borrowing costs in the world's biggest economy would remain steady, while those abroad rose.
Investors were also reluctant to take bigger bets on the greenback ahead of the U.S. Independence Day holiday on Wednesday.
Later on Tuesday, housing comes under the spotlight again with U.S. pending home sales data for June due at 1400 GMT.
"It's all been about interest rates -- the dollar dropped over the last couple of days due to spreads narrowing to its disadvantage, while rates in the UK combined with the dollar weakness is supporting sterling," Commerzbank Corporates & Markets currency strategist Antje Praefcke said.
Sterling's gains gathered pace recently, as interest rate expectations shifted sharply after minutes from the Bank of England's latest policy meeting suggested that rates would rise this week instead of August as previously anticipated.
Thursday's BoE meeting is expected to see British rates lifted 25 basis points to 5.75 percent, which would be half a percentage point higher than U.S. rates.
"We saw the 26-year high and that will continue ahead of the meeting -- with the market saying that a hike to 6 percent at some stage later may be possible," CBCM's Praefcke said, adding that the euro was also supported by expectations for euro zone monetary tightening.
By 1011 GMT, sterling stood at $2.0157, steady on the day, after hitting a 26-year peak of $2.0197 .
The euro was trading around 166.56 yen, after scaling a record high of 167.19 yen, according to Reuters data .
The dollar was steady at 122.44 yen , but remained near a three-week low of 122.09 yen touched on Monday. Bank of Japan's index for the yen, after adjusting for the inflation rates of Japan and its major trading partners, dropped to a 22-year low of 93.4 in June from 94.9 in May .
BOJ Deputy Governor Toshiro Muto said on Tuesday the central bank has no preset schedule on interest rate adjustments, adding that moves would depend on improvements in the economy and prices.
The BOJ is expected to hold rates at 0.5 percent at its meeting next week but a majority expect it to increase them to a 12-year high of 0.75 percent in August.
The European Central Bank is seen keeping rates steady at 4.0 percent at a policy meeting this week but is expected to lift rates twice more this year.
The euro was down 0.2 percent at $1.3598, having earlier risen as high as $1.3634 -- to within half a cent of record highs set in late April .
Calyon currency strategists said in a note to clients that they still believed the dollar would strengthen in the second half of this year, despite hawkish ECB expectations.
"The second half of 2007 will be a period of dollar strength as the U.S. economy regains modest upward traction whereas expectations for euro zone growth are pared back in the face of earlier euro strength, ongoing monetary tightening and restraint on the fiscal front," they said.
Investors were also on alert for possible further action on Chinese interest rates after the country's central bank said it would strive to keep the economy from overheating and resort to a range of monetary policy tools to keep inflation in check.
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."