Dollar Pares Gain Versus Euro


The dollar pared its gain against the euro after a government report showed U.S. consumer prices increased last month less than forecast, suggesting the Federal Reserve may have more leeway to lower borrowing costs.

The dollar was little changed at $1.5462 against the euro at 8:50 a.m. in New York, from $1.5474 yesterday. The dollar traded at 105.29 yen, compared with 104.75. The yen was at 162.78 per euro, compared with 162.10.

U.S. consumer prices rose 0.2 percent in April, following a 0.3 percent increase the previous month, the Labor Department said today in Washington. The median forecast of economists surveyed by Bloomberg News was for an increase of 0.3 percent.

The Fed has cut the target lending rate seven times since Sept. 18 to avert a recession, pushing the dollar down more than 10 percent versus the euro and yen.

The dollar will strengthen against most major currencies in the next six months as the Fed stops reducing interest rates, a survey of Bloomberg users showed.

The end of rate cuts will make American assets more attractive to international investors, according to U.S. respondents in the monthly Bloomberg Professional Global Confidence Index, which questioned 3,447 users from Chicago to London to Hong Kong. While users in the U.S. grew optimistic about the greenback, participants in Germany and France became pessimistic about the euro for the first time since the survey started in November.

The U.S. currency dropped 1 percent against the euro on April 16, the biggest decline in three weeks, as an unexpected increase in U.S. consumer prices in March was overshadowed by accelerated inflation in Europe.

 


TradingEconomics.com, Bloomberg
5/14/2008 6:10:37 AM