Dollar Rises to 3-Month High

The dollar rose to a three-month high against the yen on speculation Federal Reserve officials speaking today will highlight the risks of inflation.

Fed Board Vice Chairman Donald Kohn and Fed Bank of St. Louis President Jim Bullard are scheduled to deliver speeches. Investors added to bets the central bank will raise interest rates this year, increasing the allure of dollar denominated- assets. Treasury Secretary Henry Paulson this week said he would ``never'' rule out currency intervention.

The dollar climbed to 107.76 yen, the highest level since Feb. 26, before trading at 107.69 as of 7:16 a.m. in London from 107.44 in New York yesterday. It was at $1.5503 per euro, from $1.5467 yesterday. It has surged 2 percent the past two days, the most since November 2005. The euro rose to 166.79 yen from 166.17 yen in New York.

The dollar weakened against the euro after European Central Bank council member Erkki Liikanen said inflation expectations in the euro area are starting to increase and the central bank is in a state of heightened alertness.

The U.S. currency traded at $1.9554 against the British pound from $1.9544 yesterday, and was at 1.0418 versus the Swiss franc from 1.0418.

The dollar has fallen 9.6 percent against the euro and 7.3 percent versus the yen since Sept. 18, when the Fed began to lower borrowing costs from 5.25 percent.

Gains in the dollar may be limited as the Fed releases its so-called beige book report, a survey of regional economic performance, at 2 p.m. in Washington today. Nine of 12 Fed districts said conditions weakened in the April 16 report.

Dollar Rises to 3-Month High, Bloomberg
6/11/2008 6:38:31 AM