Market News

The U.S. Dollar maintained its steady rise against major currencies, as investors expect the Federal Reserve to hike interest rates by the year’s end to curb inflationary pressures on the economy. Ben Bernanke, the Federal Reserve president, continues to express his concerns about inflationary pressures on the economy, and on Tuesday, he cautioned about the effect of inflation on the weak U.S. Dollar.

The U.S. Dollar remained steady in afternoon trading on Wednesday in Asia against the Euro and the Yen, ahead of U.S. economic data and press release by the European Central Bank on interest rates.

The U.S. Dollar fell marginally lower against major currencies in early morning trading in Sydney on Tuesday. The currency remains under pressure as it fell to its lowest level against the Yen in nine weeks in New York because of concerns of the impact of the liquidity crisis has resurfaced.

Investors are waiting for several U.S. economic data to be released this week and speeches by the President of the European Central Bank and the Federal Reserve Bank. As a result, the U.S. Dollar traded slightly lower against major currencies in early morning trading in Sydney. On June 2, 2008, at 11:00 am (01:00 GMT), the U.S. Dollar traded at 105.27 Yen, compared to 105.50 Yen, while the Euro traded at $1.5557, compared to $1.5552 in late Friday trading in New York.

In afternoon trading in Tokyo, the U.S. Dollar gained against major currencies because of better than expected durable goods data that reduced worries about the state of the U.S. economy. On May 28, 2008, at 01:00 pm (04:00 GMT), in Sydney, the U.S. Dollar traded at 104.84 Yen, compared to 104.74 Yen, while the Euro traded at $1.5634, compared to $1.5654 in late trading in New York.

The U.S. Dollar fell slightly in morning trading in Sydney because of the public holidays on Monday in the United States and the United Kingdom, coupled with the negative effect of high oil prices on the U.S. currency.

Data for existing home sales for April will be announced today by the National Association of Realtors in Washington, D.C., and experts are predicting that the data will show that the housing sector is still weak. This data will be released two days after the Federal Reserve reduced its growth forecast for 2008 and increased its estimates for inflation for the current year. It appears that, except the housing data, analysts do not see any additional data that will affect the currency market today.

Following the release of the minutes of the Federal Open Market Committee (FOMC), which showed that the Federal Reserve has lowered its growth estimates for this year, the U.S. Dollar fell against both the Euro and the Yen. Minutes from the FOMC meeting of April 30, 2008 showed that the Fed has reduced its estimate of the gross domestic product for this year to a range between 0.3% and 1.2% from the original estimate of between 1.3% and 2%. The gross domestic product is an estimate of the value of goods and services generated in the United States. It is by far the best indicator of the strength of the economy.

Investors are anxiously waiting for the minutes from the April 29-30 meeting of the Federal Open Market Committee which will be released today to determine the future of the U.S. economy. As a result, the U.S. Dollar traded in narrow limits against major currencies. The U.S. Dollar continues to come under pressure against the Euro as investors now believe that the ECB will not cut interest rates in the near future. The Dollar also fell sharply against the Yen, as investors are concerned about the increasing oil prices which rose to a record high of $129 per barrel. According to analysts the U.S. Dollar will be greatly influenced by the information outlined in the minutes of the FOMC.

The Federal Open Market Committee will be meeting today to discuss interest rate policy issues. Investors are awaiting the outcome of this meeting which will give them an indication of the direction of the interest rates in the U.S. Consequently, the U.S. Dollar was steady against several major currencies in early morning trading in Sydney today.

Due to lack of latest economic data the U.S. Dollar remained steady against major currencies. The U.S. Producer Price Index data and the German ZEW survey will be released tomorrow, which will give investors some direction as to where the foreign exchange market is heading, but for now, all investors are on the side lines. More importantly, the data will provide investors with information regarding interest rates as they prepare for information from the next meeting of the European Central Bank and the U.S. Federal Reserve.

The U.S. Dollar fell slightly against the Euro in afternoon trade on Friday in Tokyo while choppy against the Yen. The U.S. Dollar fell against the Yen immediately following the Japanese government’s release of stronger than expected real Gross Domestic Product data for the first quarter ending March, but the drop was limited, as overseas fund managers and other investors came to its rescue.

In mid-morning trading on Thursday in Sydney, the U.S. Dollar traded higher versus major currencies because of the belief that efforts by the Federal Reserve Bank to stimulate the economy is working. This optimistic view of the economy lifted the Treasury yields, even though the Consumer Price Index for April shows that core inflation still persists, which confirms speculation that the Federal Reserve Bank will not cut interest rates in the near future.

Investors’ expectations of additional rate cuts are fading which helped the U.S. Dollar which traded mixed in Tokyo on Wednesday against major currencies. The expectations of additional rate cuts faded following comments by officials of the Federal Reserve about inflation pressures. Janet Yellen, President of the Federal Reserve Bank in San Francisco, California, said that the recent figure on inflation is “disappointing” and that the consumer inflation rate is too high, even if food and energy prices are excluded.

The Pound Sterling and the Euro remained soft against the U.S. Dollar, on the expectation that interest rate differentials will shift in the months ahead. A decline in business and consumer confidence, specifically manufacturing activity and retail sales growth, as evidenced by weak economic data, lead to the suggestion by analysts that the Euro zone will experience a significant slowdown in future growth rates.