Dollar Snaps Two-Day Drop

The dollar snapped two days of declines against the euro, rallying from the lowest level in a month, as traders added to bets the Federal Reserve will raise interest rates by year-end and oil retreated., Bloomberg 5/22/2008 11:34:20 AM

The U.S. currency also gained versus the yen after minutes of the Fed's April meeting yesterday showed most policy makers viewed the cut in the target rate to 2 percent as ``a close call,'' indicating the central bank has gone on hold to stem inflation. The New Zealand dollar rose against all of the major currencies after tax cuts reduced the need to lower rates.

The U.S. currency strengthened to $1.5713 per euro as of 1:42 p.m. in New York, from $1.5795 yesterday. It earlier touched $1.5814, the lowest level since April 24. The dollar rose to 104 yen, from 103.05 yen. The euro traded at 163.41 yen, up from 162.76 yen.

The dollar extended its gains as the price of crude oil fell to $131.80 after surpassing $135 earlier. A decline in the price of oil can lighten the financial burden on consumers.

U.S. house prices fell less than expected in the first quarter. The Office of Federal Housing Enterprise Oversight said its house price purchase index declined 0.2 percent, after rising 0.3 percent the previous quarter. The median forecast in a Bloomberg News survey of 13 economists was for a drop of 1.3 percent.

The euro climbed versus the dollar yesterday after German business confidence unexpectedly rose, bolstering speculation the ECB won't cut interest rates. Germany is the biggest economy in the euro region.

Dollar Snaps Two-Day Drop