Dollar Is Little Changed Vs Euro, Yen


The dollar was little changed against the euro and the yen before the Federal Reserve ends a two-day meeting at which policy makers will probably keep interest rates unchanged, ending a cycle of seven reductions.

The U.S. currency was also little changed after European Central Bank President Jean-Claude Trichet said inflation pressures in the euro area have increased. The dollar has gained 0.5 percent since Fed Chairman Ben S. Bernanke vowed June 9 to ``strongly resist'' a leap in inflation expectations.

The dollar was at $1.5591 per euro by 6:30 a.m. in New York, from $1.5568 yesterday. It touched $1.6019 on April 22, the lowest level since Europe's currency debuted in 1999. The dollar traded at 107.94 yen, from 107.82. Japan's currency fell to 168.27 per euro, from 167.85 yesterday, when it touched 168.38, the weakest since July 23.

The U.S. currency slipped to as low as 95.48 cents against the Australian dollar and was at 95.60 cents from 95.54 cents yesterday, when it fell to 95.87 cents, the lowest since June 9.

All 102 economists surveyed by Bloomberg predict the Fed will keep borrowing costs unchanged today. The chance of an increase to 2.25 percent is 10 percent, from 16 percent a week ago, futures contracts on the Chicago Board of Trade show. Odds for a quarter-point increase in August were 32 percent from 41 percent last week.

There's a ``risk'' the U.S. currency may fall to $1.60 per euro in the next three months because ``the market consensus has become too much expecting of a Fed rate increase,'' Myers said.

The dollar has gained 1.3 percent against the euro this quarter as traders bet the economic slowdown sparked by the collapse of the subprime-mortgage market will spread to Europe as the U.S. recovers. This year, the dollar is down 6.7 percent.

The U.S. currency has fallen from a one-month high of $1.5303 per euro reached on June 13, four days after Bernanke said economic risks have faded and accelerating inflation ``would be destabilizing for growth.''

The dollar may weaken before a Commerce Department report today that will show new-home sales fell to an annual pace of 512,000 in May, close to a 17-year low, according to the median estimate of economists surveyed by Bloomberg.

The Fed statement ``will probably not signal more emphasis on inflation than growth risk, and such should be a disappointment to the market,'' Ashley Davies, a currency strategist in Singapore at UBS AG, the world's second-biggest currency trader, wrote in a report today. ``Our short-term bias is still for further dollar weakness.''


TradingEconomics.com, Bloomberg
6/25/2008 6:48:02 AM