Dollar Keeps Gains After Greenspan
By REUTERS
Filed at 11:15 p.m. ET
TOKYO (Reuters) - The dollar stayed bouyant on Friday, keeping modest gains made after Federal Reserve Chairman Alan Greenspan said the U.S. economy was on a ``firm footing'' and that interest rates still had room to rise.
Some in the market were relieved that Greenspan was upbeat, though cautious, in his remarks to Congress on Thursday, given recent comments by other Fed officials that suggested the central bank might be nearing the end of its rate-raising cycle.
Other traders said his outlook was not unexpected as the Fed chief doesn't want to rock the boat in the waning months of his 18 years at the Fed's helm.
``He's not the type to do anything dramatic toward the end of his career,'' said a dealer at a European brokerage in Tokyo.
``He doesn't want the market and the (market) environment to be too drastic while he's in office.''
Greenspan is due to step down in January.
At 0245 GMT, the euro fetched around $1.2235 That was almost flat from late trade in New York, where the euro fell as far as around $1.2176, just off last week's eight-month low of $1.2158.
The dollar was little changed at 107.45 yen Dealers said its advance was stemmed as Japanese exporters had sell orders lined up around 108 yen.
The euro zone currency was around 131.50 yen up from 131.38 yen.
Greenspan told a congressional committee: ``Despite some of the risks that I have highlighted, the U.S. economy seems to be on a reasonably firm footing, and underlying inflation remains contained.
``Accordingly, the Federal Open Market Committee in its May meeting reaffirmed that it '... believes that policy accommodation can be removed at a pace that is likely to be measured,''' he added.
The Fed has raised short-term borrowing costs eight times since last June to 3 percent in a bid to head off inflation.
DATE WITH TRADE DATA
Greenspan's comments helped to dispel worries prompted by Dallas Fed President Richard Fisher's suggestion last week that the central bank was in the final stages of its tightening cycle.
``Expectations that (the Fed) might stop interest rate hikes by the end of the year have retreated,'' said Tohru Sasaki, chief forex strategist at JPMorgan Chase in Tokyo.
The widening interest rate advantage the dollar enjoys over its major rivals has been a key to the currency's rise of around 10 percent against the euro and nearly 5 percent versus the yen this year.
It has helped divert attention from concerns about whether the United States can keep financing its trade and budget deficits. Such concerns helped to push the dollar index down 30 percent over the three years to the end of 2004.
The market was waiting on the U.S. trade report for April, due at 1230 GMT, which is expected to show the deficit widening to $58 billion from $55 billion in March.
Also in focus was a London meeting of finance ministers from the Group of Seven industrialized nations plus Russia that starts on Friday. China's economy and its yuan policy are expected to be on the agenda.
However, dealers said the market has become jaded after long and intense speculation about when Beijing will loosen the yuan peg to the dollar, saying the meeting would likely pass without any impact on currencies.
``The market is not going to be interested if they are not going to give any specific timing (for a revaluing),'' said the trader at the European brokerage. |
