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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (28241)	8/17/1999 8:14:00 AM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

The CPI, slated for release at 1:30 p.m. London time, is expected to have risen 0.3 percent in July after showing no change in May and June, according to a Bloomberg News survey. The core rate of inflation, excluding food and energy, probably rose 0.2 percent last month. ``I don't think we're going to see anything that's going to throw us over the edge' on inflation in the U.S., said Jamie O'Neill, a senior trader at First Union Corp. ``We'll see further strength in equities and a stronger dollar.' The dollar could rise 1 percent to 2 percent against the euro in the coming days, and it could rise versus the yen, O'Neill said. Traders and investors will scour the CPI report for clues to whether the Federal Reserve needs to raise interest rates more than 25 basis points at its next policy meeting on Aug. 24 to head off inflation. Rising prices erode the value of bonds, while the higher rates needed to contain inflation can hurt stocks. That saps demand for dollars needed to buy those securities. Risks A report that comes ``in line with expectations would be really dollar-positive,' said Claudio Piron, a treasury economist at Standard Chartered. Still, ``there are risks you can get a very strong number,' given rising energy prices in July, he said. ``If the core rate surges to 0.4 or 0.5 percent, the dollar could plunge,' said Hikari Sekioka, vice president for the foreign exchange and international treasury division at Sakura Bank Ltd. in Tokyo. In Tokyo trading the yen retreated against major currencies amid signs of growing military tension in Asia that lured some traders to the perceived safety of the dollar. Dow Jones News Service cited the Russian news agency Itar- Tass to say North Korea is ready for a test launch of a new ballistic rocket. Meanwhile China's state-run Xinhua news agency reported Chinese Marines are practicing amphibious landings in the South China Sea. Investors tend to hold on to dollars as a haven in times of global strife. Reports on tensions in ``North Korea and China lifted the dollar,' said Hirofumi Ise, head of foreign exchange at ING Bank NV. ``This kind of rumor doesn't usually sustain' the currency market. ``If the talks are true, though,' the dollar could have kept its gains.