The U.S. currency traded in narrow ranges on Tuesday against major currencies as investors’ expectations that the Federal Reserve Bank will hike interest rates soon started to wane. It appears that the recent weak U.S. economic data is influencing the Fed’s decisions to hike interest rates. Many analysts believe that the market has to scale back its expectations of any aggressive interest rate hike by the Fed in the months ahead.
European Central Bank’s determination to curb inflation, coupled with an unexpected sharp contraction in the manufacturing data released by the Federal Reserve helped push down the U.S. currency. The N.Y. Federal Reserve Empire State’s Manufacturing Index fell by 5 points to negative 8.68 in June; this is the fourth negative data in the past five months.
In the Euro zone, annual inflation increased to a record level of 3.7% in May; this increase has prompted hawkish comments from several officials of the European Central Bank regarding the urgent need to contain inflationary pressures in the Euro zone.
On June 17, 2008, at 23:40 GMT in Sydney, the U.S. dollar traded at 108.18 Yen versus 108.23 Yen, while the Euro traded at $1.5470 compared to $1.5475 in late trading in New York.