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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: macavity who wrote (50365)	5/24/2004 6:09:56 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

<<Fed manufacturing survey showed unexpectedly marked fall in business activity, yet still the strongest employment component for 30 years.>> Oga, that's why Job figures is top five! Dollar softens on dovish Fed talk By Steve Johnson in London Published: May 21 2004 11:50 \| Last Updated: May 21 2004 11:50 The US dollar fell in London morning trade on Friday as expectations of sharp monetary tightening were softened by overnight rhetoric. Ben Bernanke, a board member of the Federal Reserve, said in a much-trumpeted speech that rates could be raised at a "gradual" pace, barring economic surprises, a less hawkish comment than some had expected. This comment seemed to outweigh Mr Bernanke's suggestion that the neutral range for the Fed funds rate was 3.7 to 4.7 per cent, higher than the previous consensus range of 3 to 4 per cent. The market was also struggling to price-in Thursday's Philadelphia Fed manufacturing survey, which showed an unexpectedly marked fall in business activity, yet still the strongest employment component for 30 years. High oil prices also seemed to be sowing a degree of confusion in the market. "Investors are torn between the negative impact of rising oil prices on growth and its risks for inflation, leaving interest rate markets somewhat bewildered," said Mitul Kotecha, global head of fx strategy at Calyon investment bank. "In the absence of any shocks on the inflation front, we continue to believe that the risk to the dollar remains to the downside, with the lack of impetus from rate expectations likely to turn market focus back to the deteriorating state of the US external deficit," he added. This was the case on Friday, with the greenback slipping almost a cent against the euro to $1.2034, almost two cents against sterling to $1.7916 and 1.2 centimes versus the Swiss franc to SFr1.2753. The dollar's decline was particularly notable against the yen, as it fell 1.1 per cent to Y111.84. The yen has been the marionette to the Tokyo bourse's puppetmaster in recent weeks, rising and falling in concert with volatile Japanese equities. Overnight the Nikkei 225 rose 1.9 per cent on upbeat earnings statements, allowing the yen to rise in unison. The Nikkei has now risen 5.4 per cent since Monday, far less than the 14 per cent it had lost since April 26, but "enough for foreign exchange traders to question the appropriateness of running short yen positions," in the words of Derek Halpenny, currency economist at Bank of Tokyo-Mitsubishi. Sterling was boosted by data from the British Bankers' Association showing mortgage lending rose to a record £6.4bn in April, compared to recent monthly averages of £5.6bn, increasing the scope for Bank of England rate rises. As such, sterling firmed to £0.6714 against the euro.