CURRENCIES: Dollar Falls Vs. Rivals On Rate Expectations; Thailand Cuts Rates
Wed, May 23 2007, 17:30 GMT
djnewswires.com
CURRENCIES: Dollar Falls Vs. Rivals On Rate Expectations; Thailand Cuts Rates
By Wanfeng Zhou
NEW YORK (MarketWatch) --The dollar retreated Wednesday, coming off multiweek highs against the other major currencies on growing expectations that interest rates in Europe will continue to rise this year.
The greenback gave back some of its recent gains after better-than-forecast euro-zone economic data stoked speculation the European Central Bank will remain inclined toward lifting rates. Meanwhile, the British pound rose across the board after the minutes from the latest Bank of England meeting showed a unanimous vote for a quarter-point rate hike earlier this month.
"A combination of more hawkish [Bank of England] minutes, stronger-than-expected euro-zone industrial orders and talk of reserve-related demand helped cap the dollar," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, told clients.
"The price action today may be the first preliminary indication that what we have regarded as largely a position-adjusting/technically inspired dollar bounce may be running out of steam," he said in a research note.
In New York trading, the euro traded at $1.3479, compared with $1.3450 late Tuesday. The dollar was quoted at 121.53 yen, compared with 121.54 yen.
The pound stood at $1.9876 vs. $1.9749. The dollar changed hands at 1.2262 francs, compared with 1.2292 francs.
The euro traded at 163.85 yen vs. 163.38 yen.
The dollar slumped to a record low against the euro and a 26-year trough against the pound in late April, on growing expectations the yield differential between the U.S. and other parts of the world would narrow. However, the greenback has since recovered modestly after better-than-expected U.S. data prompted investors to adjust their positions.
Euro-zone data
The euro rose after a report showed euro-zone industrial orders surged 2.7% in March, well above expectations calling for an increase of 1.0%. Orders were 8.0% higher than a year ago.
The strong numbers came after a day after data showed the latest indicator of German economic expectations rose sharply in May from April.
"Euro-zone growth prospects are going from strength to strength judging by the latest surge in industrial new orders," said David Brown, chief European economist at Bear Stearns, adding that these strong numbers should in turn "bolster support for the euro."
"The ECB should be drawing further support from strong euro-zone growth trends to justify their pledge for higher rates," he said in a note. "Euro-zone monetary policy looks too accommodative, and this tilts the odds toward rates peaking at 4.25% this year rather than 4.0%."
Bank of England
The pound rose after minutes from the Bank of England's latest interest-rate meeting showed all nine members voted for an increase of a quarter of a percentage point, to 5.5%.
The minutes also indicated that the central bank considered making, for the first time in its ten-year history, an interest-rate hike of half a percentage point, although none of members ultimately backed such a move.
David Rodriguez, currency analyst at DailyFX.com, said the minutes surprised many traders who expected to hear at least one voice of dissent. "Perpetual dove David Blanchflower concurred with the majority view voting to take rates higher after the headline [consumer price index] rate breached 3.0 percent level in April."
As a result, sterling rallied on the news as the market "once again considered the possibility of another BoE rate hike in the next few months," he said. |
