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Dollar struggles after Fed keeps rates steady
Oil resumed its rally to set a fresh record peak, with a major deteriorating inflation picture in developed and emerging markets pressurising major central banks to hike interest rates in the midst of a stagnating global growth.
- Special to Gulf News
- Published: 00:15 June 29, 2008
Dubai: Oil resumed its rally to set a fresh record peak, with a major deteriorating inflation picture in developed and emerging markets pressurising major central banks to hike interest rates in the midst of a stagnating global growth.
Euro
The dollar struggled at the start of last week as the Federal Reserve began a two-day monetary policy meeting on Tuesday, with markets betting the US central bank to hold interest rates at two per cent.
The euro hit a record high of 169.45 yen on Thursday and has gained around 2.5 per cent versus the dollar over the past two weeks to rise above the $1.5750 level.
The widely expected 25 basis point hike on July 3 would widen the gap further, giving the euro its biggest yield advantage over the dollar in its nine-and-a-half year life.
Range for previous week: $1.5344-$1.5651 (Dh5.6359- Dh5.7486). Range for this week: $1.5500-$1.5800 (Dh5.6932-Dh5.8033).
Yen
The yen plummeted to an 11-month low versus the euro and lost ground against the dollar on talks that investors in Japan were using summer bonuses to buy higher yielding assets overseas.
The Japanese currency has been hurt by expectations the Bank of Japan will keep interest rates at a low 0.5 per cent for awhile due to weakness in the domestic economy.
Range for previous week: 107.10 yen to 108.58 yen (Dh0.033828-Dh0.034618). Range for this week: 106.50 to 109.50 (Dh0.033543 to Dh0.034488).
Sterling
Sterling appreciated as the dollar resumed its decline a day after the Fed disappointed the market by giving no hint on when it would start raising interest rates.
The Bank of England is worried by the prospect of inflation rising above four per cent this year, but also conscious the economy was slowing and this would help tame price pressures. Sterling dipped as low as $1.9808 on Friday before recovering to $1.9830 levels after UK GDP data showed a downward revision.
Range for previous week: $1.9457-$1.9791 (Dh7.1466- Dh7.2692) Range for this week: $1.9500-$1.9800 (Dh7.1624-Dh7.2725).
- HSBC Global Markets Middle East
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