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Apr-27-2008

Dollar Posts Biggest Gain Versus Euro in Month on Fed Outlook

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NEW YORK, April 25 (Reuters) - The dollar headed for its best monthly performance in 2-1/2 years against a basket of major currencies on Friday, boosted by a growing view that the Federal Reserve may stop cutting interest rates. (More...)
Bank of America Corp., the second-biggest U.S. bank by assets, advised clients to sell the dollar and buy the euro in a note to clients today. (More...)
Against the Euro, the Japanese currency traded at 163.47 at 7:00am GMT. Rising stock market is pushing investors''' confidence up, leading to a decrease of the Japanese currency against the South African Rand. (More...)
Economists had been expecting claims would rise by 3,000. (More...)
The ECB officials spoke after a much weaker-than-expected German business sentiment reading raised further questions about the ongoing resilience of the eurozone economy. (More...)
The shift in expectations is a positive development for the dollar because lower Fed rates tend to lead investors to sell the dollar and buy assets that pay higher yields. (More...)
Oil prices had a recent low point in January 1999 at $8 per barrel, after "increased oil production from Iraq coincided with the Asian financial crisis, which reduced demand. (More...)
The yen that closed yesterday's deals at 163.49 against the euro reached a low of 163.67 at about 9:55 pm ET Thursday. (More...)

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NEW YORK, April 25 (Reuters) - The dollar headed for its best monthly performance in 2-1/2 years against a basket of major currencies on Friday, boosted by a growing view that the Federal Reserve may stop cutting interest rates. U.S. economic data this week showing resilience in some sectors, such as the labor market, contrasted with a sharp drop in business sentiment in Germany. That news, combined with European Central Bank policy-makers' comments highlighting worries about excess volatility in foreign-exchange trading, dampened expectations for a rate hike in the euro zone and hurt the euro. "It's a major shift in sentiment regarding the outlook of interest rates and we may see the dollar strengthening until the next Fed meeting," said Mark Meadows, a market analyst at Tempus Consulting in Washington. The perceived odds of the Fed keeping its benchmark interest rate unchanged at 2.25 percent at its meeting next week rose to about 26 percent, futures trading shows FEDWATCH. Just over a week ago, futures were evenly split between a 25- and a 50-basis-point cut. [1] April 25 (Bloomberg) -- The dollar headed for its biggest weekly gain in a month against the euro as traders raised bets the Federal Reserve will stop cutting interest rates. The euro fell to its lowest level in three weeks after a European Central Bank report showed money-supply growth slowed more than economists forecast last month. The odds of the Fed keeping its target rate for overnight loans between banks on hold this month increased to 26 percent, from 2 percent a week ago, futures trading shows.[2]

The euro's fall followed a rally to a record $1.60 on Tuesday, the highest level since the euro's inception in 1999, as investors bet the European Central Bank would raise interest rates to restrain inflation. ECB policy-makers' comments on excess volatility in euro trading combined with weak economic growth data this week, triggered a sell off in the currency, analysts said.[3] The soft data rekindled talk of a possible interest rate cut by the European Central Bank (ECB) in the coming months, but analysts said that stubborn inflation would make it hard for the ECB to loosen monetary policy. The euro's gains were capped by speculation that the U.S. central bank might soon halt its series of interest rate cuts, possibly after one more 25 basis point reduction next week.[4] The dollar has been weighed down by a combination of gloomy U.S. economic data and high European inflation - fueling expectations that the Fed will cut interest rates yet again while the European Central Bank will leave rates unchanged. Lower interest rates can weigh on a nation's currency as traders transfer funds to countries where they can earn better returns, while higher rates are used to curb inflation.[5] The dollar has been weighed down recently by a combination of gloomy U.S. economic data and high European inflation. That has fueled expectations that the Federal Reserve will cut interest rates yet again while the European Central Bank leaves rates unchanged — or even raises them, a possibility deflated by Thursday's German business confidence survey.[6]

NEW YORK (AFP) — The dollar gained ground Thursday as speculation grew that the U.S. Federal Reserve might soon call a halt to interest rate cuts while the European Central Bank may have to lower its rates.[7]

If the dollar is, in fact, to begin a long period of strengthening, it may result in a drop in foreign purchases, a fundamental weakness that should weigh on prices. This week specifically, the dollar started to strengthen after reports out of Europe on Wednesday showed slowing economic growth. This news seemed to imply that rate cuts may be necessary in Europe in an effort to avert a recession. On Thursday, a story from the Wall Street Journal suggested that the Federal Reserve may cut interest rates only once more before pausing to see what effect its previous rate cuts have on the economy. If traders believe that we are nearing the end of U.S. rate cuts, nearing the start of European rate cuts, and entering a period of concerted effort to prop up the dollar, they should act accordingly and start selling commodities. This is exactly what happened this week.[8] The Canadian dollar weakened against the greenback as slowing global growth, which Canada has been seen participating in lately, prompted investors to buy the greenback as a safe haven. The loonie has also been under pressure this week as the hefty 50 basis point interest rate cut by the Bank of Canada has cast doubt on the resilience of the Canadian economy. The Australian dollar fell off its 24-year peak against the U.S. dollar, after it surged on speculation that domestic interest rates were headed higher in the near term.[9]

Tuesday's remarks by Yves Mersch in the Financial Times Deutschland and comments made by Christian Noyer to France's RTL radio showed the governing council of the ECB is committed get euro zone inflation back around 2 percent, below the current 3.6 percent it is at now. It effectively threw water on any hopes of a rate cut by the bank, which has kept its benchmark rate unchanged at 4 percent since June even as the U.S. Federal Reserve, Bank of England and Bank of Canada have consistently lowered their own rates. The Bank of Canada on Tuesday slashed its interest rate by half a percentage point to 3 percent. It also hinted another cut may be coming as it feels the effects of a slumping economy at its largest trading partner.[5] Friend noted Ifo data has been volatile in the past, and the survey also showed that executives remained sanguine about export prospects. Next week's round of U.S. economic reports, including widely followed purchasing managers data from the Institute of Supply Management, are likely to underscore the continued weakness of the U.S. economy, limiting room for the dollar to extend its rebound, he said. Euro bears, meanwhile, argue that recent figures show the eurozone economy is beginning to lose its resilience amid concerns about the depth of the U.S. downturn and the ongoing impact of the global credit crunch. The ECB has left its key interest rate on hold at 4% since June, and officials have emphasized repeatedly worries about the potential for surging inflation pressures to become entrenched in the economy.[10]

Cable could possibly fall to 1.95 next week, if the Fed signals a shift in policy towards a pause in rates, after next Wednesday's FOMC meeting. The yen has gained 2 yen against the euro in the past 2 days but its gains are wholly attributable to a stronger U.S. dollar which has seen a close-out in over-extended positions on the euro, while it has also benefited from a fall in commodity prices which has led to a shaving of carry trade positions, particularly in AUD/JPY and NZD/JPY. Last night's CPI data release in Japan revealed that inflation in the world's second strongest economy rose to an annualised 1.2% in March, in line with expectations, yet at an unprecedented level for an economy that has been gripped by deflation for much of the past 7 years.[11] The low yielding Yen staggered lower against the U.S. dollar as it fell to 104.4, with the Swiss franc trading below parity as the pair traded in the 1.036 range. Consumer sentiment for the U.S. continued to deteriorate as the U. of Michigan Confidence index was confirmed at a 26 year low of 62.6, with more consumers feeling strapped for cash as they dish out more money for food and gas. Inflation is now a major concern for the Fed as their 300bps worth of rate cuts since last September may have only fanned price pressures, and as a result, market participants are considering that the Fed could actually leave rates unchanged next week.[12] As market participants withdrew bets of a rate cut by the Fed next week, the U.S. dollar strengthened against all of the major currencies expect for the British Pound as fresh GDP data for the UK fell in line with expectations. The U.S. dollar continued its chip away at the Euro as the pair traded in the 1.559 range, with bearish sentiment dragging down the European currency as cooling inflation sparked speculation that the ECB may turnaround from their hawkish stance.[12]

The U.S. dollar also received a boost from an unexpected drop in initial jobless claims last week and garnered support from U.S. corporate earnings, with 30 out of 41 releases from S&P; 500-listed companies exceeding expectations yesterday. The greenback later pared gains versus both the euro and the yen on the release of an unexpectedly low reading of U.S. new home sales in March. The euro fell against the dollar and yen after reports showed German and French business confidence fell this month. It was knocked even lower as orders for U.S. durable goods (excluding transportation equipment) rose more than forecast in March. This data is forcing people to reassess their views of the euro as it highlights that European growth is facing significant headwinds.[9]

The yen advanced against the euro after a government report showed Japan's core consumer prices increased 1.2 percent in March from a year earlier, the most in a decade. Japan's five- year notes had their biggest slump in almost nine years as traders speculated the Bank of Japan will lift interest rates this year. The Australian dollar fell to 93.29 U.S. cents from 93.97 cents, pushing its two-day drop to almost 2 percent.[2] The yen fell for the second consecutive week against the dollar after a government report showed yesterday that Japan's core consumer prices increased 1.2 percent in March from a year earlier, the most in a decade. Japan's five- year notes had their biggest slump in almost nine years yesterday as traders increased speculation that the Bank of Japan will lift its 0.5 percent target lending rate. South Africa's rand was the biggest gainer versus the dollar this week, rising 2.2 percent to 7.6167, as traders bet that policy makers will lift the 11.50 percent target lending rate.[13]

The single currency fell against the Japanese yen from 163.83 to 162.67 on Friday after the release of Japan's core consumer prices, which increased 1.2% in March from a year earlier, the most in a decade. Japan's five-year notes had their biggest slump in almost nine years on speculation that the Bank of Japan will increase its 0.5 percent target lending rate.[14] Japanese Consumer Price Index (CPI) was revealed yesterday, showing a rose of 1.2 percent in March, the most in a decade. After the release of this indicator of the inflation trend, speculation that the Bank of Japan will increase interest rates, leaded Yen to an expected slump, the biggest in almost nine years.[15] Many traders believe that the energy and food price inflation that caused the increase in CPI is exogenous and will not result in higher interest rates from Bank of Japan. The BoJ'''s Policy Board convenes next Wednesday and is expected to keep the overnight call rate unchanged at 0.50%, upgrade its inflation forecast, and downgrade its forecast for GDP growth for the fiscal year to March 2009.[16]

"The euro represents a pretty significant threat to the European economy.'' A 1 percentage point increase in the euro's real exchange rate reduces growth in the region's exports by 0.6 percent within a year, according to a note this month from Deutsche Bank AG, the biggest currency trader.[17] The U.S. central bank next meets to set interest rates on April 30. The pound rose 0.4 percent to 78.84 pence per euro after European Central Bank President Jean-Claude Trichet said this past week he's concerned the surge in the region's single currency may hurt the economy.[18] GDP is the major measure of economical activity and health; more important, the central bank is more likely to raise interest rates if the country faces a strong and growing economy, which has a major impact in the value of the Pound. Later today will be revealed American consumer sentiment; higher sentiment levels are a leading indicator of rising consumer spending, which has a positive impact in the U.S. economy and, consequently, in its currency.[15]

In a separate release, the U.S. Commerce Department revealed the nation's trade deficit expanded unexpectedly by 5.7% to $62.3 billion in February. As expected, the European Central Bank had left the interest rates unchanged, while the Bank of England cut its benchmark interest rate by 25 basis points to 5 percent.[19] NEW YORK (AP) - The euro roared to another record high Tuesday, crossing $1.60 for the first time ever after a pair of European Central Bank governors said high inflation may cause the bank to raise interest rates.[5] By contrast, the European Central Bank (ECB) is seen as coming under pressure to lower eurozone interest rates in the coming months following a much weaker than expected German business survey. The Ifo research institute said its April business climate index for Germany fell to 102.4 from 104.8 in March, well below forecasts of a decline to 104.3.[7] The Munich-based Ifo institute has reported that its German business climate index has fallen from 104.8 in March to 102.4 this month, its lowest level since January 2006. With eurozone inflation at 3.6 per cent ' its highest for almost 16 years ' economists expect the ECB will keep interest rates at four per cent for some time, The Financial Times reported.[20]

Investors should buy dollars with a target of 105 yen and a sell order at 103.20 yen to limit losses, the report said. The euro weakened against the dollar yesterday as the Munich-based Ifo institute said its German business climate index fell this month to the lowest in two years. ECB President Jean-Claude Trichet told reporters at a conference in Frankfurt yesterday that he is concerned the euro's surge may hurt the economy. The euro has appreciated 7 percent this year against the dollar on speculation inflation and higher fuel prices will discourage the ECB from lowering borrowing costs from a six-year high of 4 percent.[2] European Central Bank President Jean-Claude Trichet told reporters at a conference in Frankfurt yesterday that the bank is concerned that the euro's recent surge to a record against the dollar may hurt Europe's economy. The euro has appreciated 7 percent this year against the dollar on speculation inflation will discourage the ECB from lowering borrowing costs from a six-year high of 4 percent. The dollar extended its gain versus the euro yesterday as the Commerce Department said bookings increased 1.5 percent for goods meant to last several years, outside of cars and planes, following a 2.1 percent decline for February.[17] The euro weakened against the dollar today as M3 money supply, used by the ECB as a gauge of future inflation, grew at an annual rate of 10.3 percent in March, compared with 11.3 percent in the previous month, the Frankfurt-based central bank said today.[21]

Governor Tito Mboweni said yesterday that the central bank may call an emergency meeting on accelerating inflation. The Canadian dollar weakened after policy makers reduced the key lending rate by a half-percentage point to 3 percent on April 22 and signaled they may cut borrowing costs further.[13]

The dollar weakened against the euro on Monday, due to rising inflationary pressures, which had sparked speculation that the next move by the European Central Bank (ECB) may be a rate hike instead of a rate cut.[22] Traders and investors bought the currency betting the next move by the European Central Bank would be a hike on benchmark interest-rates. ECB policy makers' comments on excess volatility in euro trading combined with soft economic data this week, dampened such expectations and triggered a sell off in the currency, analysts said.[23] The weak economic data and the comments from European Central Bank policy-makers' on worries about excess volatility in foreign exchange trading continued to pressure the single currency and dampened expectations for a rate hike in the euro zone.[14]

SAN FRANCISCO (Dow Jones) -- The dollar extended gains on its major counterparts Thursday, after less hawkish comments from European Central Bank officials dragged down the euro, and a spate of mixed U.S. economic data contained a few kernels of good news.[10]

THE dollar traded at three-week highs against the euro, boosted by a growing view the Federal Reserve may stop cutting interest rates soon and that euro rates have peaked. U.S. economic data this week showed resilience in some sectors, such as the labour market, contrasting with a sharp drop in business sentiment in Germany. Mark Meadows, a market analyst at Tempus Consulting in Washington, said: "It's a major shift in sentiment regarding the outlook for interest rates and we may see the dollar strengthening until the next Fed meeting."[24] The number of U.S. workers filing initial claims for unemployment benefits unexpectedly fell last week, data on Thursday showed, in a possible sign that the economy may not be in as much trouble as previously thought. Fed futures are now pricing in a 30 percent chance of interest rates being held at 2.25 percent this month rather than being cut.[25] Sterling fell against the dollar but rose against the euro as contrasting data from the UK economy gave investors mixed signals on potential upcoming interest rate cuts by the BoE. Yearly retail sales data was revised up, leaving sales growth strong over the first quarter of the year.[9] April 26 (Bloomberg) -- The dollar rose the most against the euro in a month as traders increased bets that the Federal Reserve may stop cutting interest rates at its meeting next week and the European economy showed signs of a slowdown.[13] April 25 (Bloomberg) -- The dollar may extend its rally against the euro as traders increase speculation that the Federal Reserve will stop cutting interest rates. The euro plummeted yesterday the most against the dollar since December after reports showed business confidence fell in Germany and France this month.[17]

Economists had expected jobless claims to edge up to 375,000 from the 372,000 originally reported for the week ended April 12th. Investors also took note of a story in the Wall Street Journal suggesting that the Federal Reserve may stop cutting rates after easing its short-term interest rate by a quarter of a percentage point next week. The dollar saw its biggest one-day gain against the euro in years.[26] The decline was in line with expectations. The data come ahead of next week's Fed meeting on April 29-30 to decide on interest rates, with most analysts expecting a 25 basis-point cut to its benchmark rate, from the current 2.25%. An article in Thursday's Wall Street Journal by noted Fed watcher Greg Ip said, "The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week -- but then may be ready for a breather." Lower interest rates weigh on a currency because they reduce the returns on assets denominated in that currency.[10] '''We have started to see a bit less panic in the U.S. and that also translates to expectations that the Fed rate cuts might be coming close to an end''', said Naomi Fink, a strategist in Tokyo at Bank of Tokyo Mitsubishi UFJ Ltd. The Dollar reached a second winning week against the Yen and is expected to continue to strength as investors speculate that Fed will stop cut interest rates; the U.S. currency traded at 104.38 against the Yen at 8:00am GMT. BNP Paribas analysts believe that investors should buy dollars with a target of 105 yen and a sell order at 103.20 yen to limit losses.[15] Two-year German government bonds yield 1.43 percentage points more than similar-maturity Treasuries, from 1.49 percent yesterday. The dollar is likely to be supported against the yen as the Treasury yield curve is flattening, showing increased expectations the Fed will pause in its rate cuts, according to BNP Paribas SA, France's largest bank.[2]

The Dow Jones Euro Stoxx 600 Index climbed for a second week, gaining 0.3 percent, while the U.K.' s FTSE 100 Index rose 0.6 percent. The pound fell against the dollar this past week, dropping 0.8 percent to $1.9829, as traders bet the Fed will this month signal it will slow the pace of interest-rate cuts.[18] The dollar index, which tracks the greenback's performance against a basket of major currencies, rose to a one-month high of 73.021. By 3:53 a.m. EDT the euro fell as low as $1.5586, its lowest since April 3, down around 0.5 percent on the day and on track for its biggest monthly decline in nearly a year.[25]

The U.S. currency has increased 2.5 percent versus the euro in three days after reaching a record low of $1.6019 per euro on April 22. It's up 1.3 percent against the euro since April 18, the biggest weekly gain since March. The dollar is 0.8 percent higher versus the yen this week, for its second straight gain. The euro has dropped 0.6 against the yen this week.[21] "When the euro falls, it tends to come off hard.'' The U.S. currency may strengthen to $1.5450 per euro before the Fed's meeting next week, he said. The euro touched the record earlier in the week as investors raised bets on an ECB rate increase this year and the price oil surged past $119 a barrel.[13] The ECB's hawkish stance remains intact but the meteoric rise in energy costs has put paid to any idea the Fed might be cutting interest rates to 1% in the coming months. Even were the ECB to stand pat for the remainder of this year, U.S. inflation risks would suggest that, after next week's Fed rate decision, we are unlikely to see any great widening of U.S. and Euro zone interest rates through to the end of the year.[11] The speculation that Fed will stop cutting interest rates on increasing concern about the inflation outlook is boosting the U.S. currency;.[15]

"A more significant force behind the movement in the dollar was the looming potential of a narrowing in gap between the monetary policy stance of the Fed and the ECB," wrote David Watt, senior currency strategist at RBC Capital Markets. European monetary officials subtly but effectively changed their tune on interest rates Thursday, with ECB President Jean-Claude Trichet, ECB executive board member Juergen Stark and ECB governing council member Michael Bonello all suggesting a rate hike is not in the cards.[10] Analysts had expected a slight gain in claims. European Central Bank President Jean-Claude Trichet said on Thursday that he had concerns over the implications of fluctuations in currency exchange and their impact on financial stability. He also indicated that the ECBs current interest rates would contribute toward the goal of price stability. This article is copyrighted by International Business Times.[27] A sharp slowdown in Europe will damp inflation and force the European Central Bank to cut interest rates within six months, the IMF's European Director, Michael Deppler, said in an interview on April 21.[28] The financial markets are now pricing in an interest rate cut by the European Central Bank in 2009.[16]

Mexican consumer prices unexpectedly increased in early April, putting pressure on the central bank to hold interest rates steady at 7.5 % for the sixth straight month on April 18.[29]

Futures on the Chicago Board of Trade showed yesterday an 18 percent chance the U.S. central bank will hold the target lending rate at 2.25 percent on April 30, compared with no chance a week ago.[17] Slowing money-supply growth may make it easier for the ECB to cut the 4 percent main refinancing rate, which would erode the appeal of euro-denominated assets. Futures on the Chicago Board of Trade show a 24 percent chance that the Fed will hold the target rate for overnight lending between banks at 2.25 percent at its April 30 meeting, compared with 2 percent odds a week ago.[21] The Bank of America became the latest victim of subprime-related losses. It reported a 77 per cent drop in net income as provisions for credit losses hit $6 billion. In order to raise capital, the bank has been forced to sell part of its highly lucrative stake in China's Construction Bank. Fed fund futures are currently pricing in an 82 per cent chance of a quarter point rate cut this week with the remaining 18 per cent probability in favour of no rate cut at all. This is a sharp departure from just a week ago when the market was pricing in a 76 per cent chance of a 25 basis points cut and a 24 per cent chance of a 50-point cut.[22]

"Surprisingly soft economic data out of the eurozone have been matched with U.S. data that did not spoil current market optimism that the worst in the U.S. is over and the U.S. economy will do better in a not too distant future, allowing the Fed to signal a rate cut pause next week.[4] Ashraf Laidi, currency strategist at CMC Markets, said any signal from the Fed next week that the cycle of rate cuts could be coming to an end could herald the start of a significant recovery for the U.S. currency. "In the event that the (Fed) shows any sign of reducing its easing policy, then currency markets will obtain the necessary green light to accelerate the buying in the dollar," he said.[7] Traders will still be willing to jump on the euro on any dips in the short-term because the single currency's rapid rise since last September has made the currency look too much like a sure thing to many, come what may. If the Fed signals a pause in rates in its latest statement next Wednesday, presumably after having cut the Fed Funds rate to 2%, then the euro will be in trouble and the peak of 1.6015 hit earlier this week could begin to look like a colossus.[11] The euro has peaked for now and with speculation rising that a rate cut from the Fed next week could be the last before then pausing, many traders are reluctant to pour back into the euro in the run-up to that event.[11]

The dollar hit a three-week high against the euro Friday and a nearly two-month high against the yen as investors became less sure the Federal Reserve might cut rates in the coming week. Interest-rate futures contracts on Friday indicated a quarter-percentage-point rate cut is still expected by markets, but the odds of such a reduction are now 74%, down from 100% a week ago.[30] A strengthening dollar would have the impact of dampening global inflation and if growth data in the Euro zone continues to soften further, the likelihood of an ECB rate cut before the end of the year would rise and the euro will go into reverse gear.[11] Policy makers including Germany's Axel Weber and Juergen Stark have suggested the ECB's current benchmark rate of 4 percent may not be high enough to combat inflation, which accelerated to 3.6 percent in March. The BGA exporters association yesterday reiterated its forecast for 5 percent growth in German sales abroad in 2008 even after the euro reached $1.60 for the first time.[28] Economists predicted a decline to 104.3, according to the median of 43 forecasts in a Bloomberg News survey. The German economy may lose momentum as the euro's 9 percent ascent against the dollar this year curbs export growth and oil prices close to $120 a barrel sap the spending power of companies and consumers.[28] "The euro has significantly increased, oil prices have significantly risen and concerns related to the U.S. economy and the growth outlook haven't abated either," said Klaus Baader, chief European economist at Merrill Lynch & Co. in London. The BDI industry federation, representing companies such Siemens, Europe's largest engineering company, said April 21 the German economy will expand about 2 percent this year after 2.5 percent growth in 2007. The IMF is more pessimistic, predicting growth will slow to just 1.4 percent this year.[28]

German business confidence dropped for the first time in four months in April as record oil prices and a surging euro dimmed the outlook for growth in Europe's largest economy. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, fell to 102.4 from 104.8 in March.[28] The Dollar rose as durable-goods orders excluding transportation equipment increased more than forecast last month, revealing that U.S. economy is starting to resist a housing market slump. The Information and Forschung (Ifo) Business Climate Index revealed yesterday, based on a survey of 7,000 executives, that German business situation fell to 102.4 this month, against the 104.8 in March, pushing the Euro down against the Dollar.[15] The currency dropped 2 percent against the dollar to 1.0355 yesterday. The euro weakened against the dollar yesterday as the Munich-based Ifo institute said its German business climate index, based on a survey of 7,000 executives, fell to 102.4 this month, from 104.8 in March.[17] Currency speculators drove the euro lower in response to a much weaker than expected German business survey on Thursday. The Ifo research institute said its April business climate index for Germany fell to 102.4 from 104.8 in March, well below forecasts of a decline to 104.3. "We have repeatedly warned that the weakening of the dollar will be interrupted by sharp counter moves from time to time and this is what happened in the last couple of days," said Commerzbank analyst Antje Praefcke.[4]

The greenback strengthened on a combination of weak overseas figures and an unexpected improvement in U.S. economic data. The euro began its fall after the Munich-based Ifo institute's German business climate index fell to 102.4 from 104.8 in March.[31]

Eurozone M3 money supply, used by the ECB as a gauge of future inflation, grew at an annual rate of 10.3% in March (forecast was 10.8%), compared with 11.3% in the previous month. The Ifo German business sentiment index released earlier this week showed the biggest monthly fall since September 2001.[14] The Ifo Institute's closely watched business sentiment index posted an April reading of 102.4, down from 104.8 in March. The drop left the index at its lowest point since January 2006 and was far weaker than the market forecast for a slide to 104.3. The euro, which had breached the psychologically and technically important $1.60 level earlier this week, had already been under pressure after Belgian business confidence data released Tuesday prompted worries of an Ifo decline.[10]

NEW YORK, April 24 (Reuters) - The dollar rose broadly on Thursday after government data showed signs of resilience in the U.S. labor market, while a key business confidence measure in Germany plunged, weighing on the European currency. Falling demand for the euro in the past two sessions came as the currency traded above a record $1.60 on Tuesday, its highest level since its inception in 1999.[23] Resistance is a level where sell orders may be clustered. The Dollar Index traded on ICE futures in New York, which tracks the U.S. currency against those of six trading partners, rose to 73.03 today, the highest in a month. It has gained from a record low of 70.698 on March 17.[2] The euro bought $1.5686 in late New York trading, down from $1.5896 Wednesday. It was the second consecutive day of gains for the dollar, distancing the U.S. currency from its record low of $1.6018 reached Tuesday.[32]

Let's compare the rise in the price of oil relative to the two currencies. If we take Autumn of 2000 as our base point when the euro was trading at its low of 0.8252 relative to the U.S. dollar and oil was trading at $35 dollars per barrel, we get the following results: The increase in price of oil in euros has been 74% since 2000, while it has been a 237% increase in U.S. dollars.[33] Now let's take a look at what the increase in price of oil in euros and U.S. dollars has been since April 2006 when Hugo Chvez wanted to lock the price at $50 per barrel. (Note: in April 2006 the euro was trading at approximately 1.22 relative to the US dollar ).[33]

The dollar was down against the Japanese currency, dropping to 103.09 yen from 104.17 yen. The high euro is bound to cause more pain for European manufacturers who export cars, food, wine and other products to the United States because it means their goods are more expensive. Airbus, a unit of European Aeronautic Defense and Space Co. announced a general price increase for its aircraft of an additional $2 million per single-aisle aircraft and $4 million per wide-body long range and A380 family aircraft as of May 1, citing the high euro and the cost for raw materials.[5] The 15-nation currency, which was introduced in 1999, has traded as low as 82 cents. It has surged recently, rising 20 cents against the dollar in just five months and 10 cents in just two months. The euro hit its last record of $1.5982 Thursday. The dollar's slump is a boon for U.S. companies that rely heavily on exports, but it's the bane of travelers as worldwide inflation rises, air fares climb and prices rise in dollar terms for everything from beer in Munich to fine wine in Paris to gondola rides in Venice.[5]

The euro replaced the former European Currency Unit (ECU) at a ratio of 1:1. However its value quickly began to drop, reaching a low of 0.8252 relative to the U.S. dollar on 26 October 2000. This proved to be a solid support level for the next two years, and in 2002 the euro began its appreciation reaching a high of 1.60 as of 23 April 2008.[33] The euro depreciated vis-''-vis the U.S. dollar today as the single currency tested offers around the US$1.5705 level and was supported around the $1.5555 level. The common currency has been given for three consecutive days and this reflects the market'''s changing perception regarding the likelihood of additional monetary easing from the Federal Reserve.[16] Even a disappointing report on the U.S. housing market failed to dent the dollar's newfound momentum. "Despite this continued weakness, the market is beginning to anticipate that the U.S. Federal Reserve is approaching the end of its easing cycle, while the ECB may need to start easing interest rates," said Hilary Love at PNC Bank. "This view was strengthened by comments today by ECB President (Jean-Claude) Trichet saying that the bank is concerned that the euro's surge to record levels may hurt Europe's economy."[7] Stronger U.S. stocks and weaker oil and gold prices also gave the dollar a lift, but analysts said the ECB remarks were behind the bulk of the gains against the 15-nation currency. They came after a Wall Street Journal report suggested the U.S. Federal Reserve may pause its rate-cutting cycle after next week's meeting.[10]

"Given the recent stable movement on the global financial markets, receding concerns about the credit crunch and surging commodity prices, there is an emerging view that the Federal Reserve Board may end the rate-cutting cycle after one more rate cut," Tokai Tokyo Securities chief economist Mitsuru Saito said. Confidence has been recovering on world stock markets recently as investors hope for a rebound in U.S. economic growth later this year despite massive losses by major U.S. banks on mortgage-backed securities gone sour.[4] "We expect rates on hold until December, when the growth outlook should have deteriorated sufficiently to prompt the first cut,'' Marco Valli, an economist in Milan at UniCredit MIB, the largest Italian bank, wrote in a client note today. The dollar may extend its advance against the yen as volatility measures weakened, suggesting increased appetite for risk, Citigroup Global Markets Inc. analysts led by Tom Fitzpatrick wrote in a research note yesterday.[2]

The euro touched a three-week low against the dollar after a European Central Bank report said money supply growth slowed last month more than economists forecast.[21] The single currency tumbled to a three-week low of 1.5555 versus the dollar on Friday after a European Central Bank report said money supply growth slowed last month more than economists forecast.[14]

Friday morning, the European Central Bank said that Euro zone M3 money supply grew at a slower pace of 10.3% from the prior year in March. The euro moved to a three-week low against the greenback, pulling further away from the record low it touched earlier this week.[34]

March annual consumer inflation was pegged at 3.6% in the euro-zone, well above the ECB's medium-term target of just below 2%. ECB council member and Bank of France Gov. Christian Noyer helped propel the euro above $1.60 earlier this week when he indicated the bank would consider raising rates if needed to bring inflation back down to 2% by 2009. Noyer subsequently revised his remarks in an interview with The Wall Street Journal, saying the comments were "overinterpreted."[10] The breakeven rate is a gauge of market expectations of inflation. Further gains in gilts and the decline in the pound may be limited on speculation the Bank of England, which has cut rates three times since December, will delay lowering them further due to concern that price pressures are building. Andrew Sentance, one of two policy makers who voted against the 25 basis-point rate cut to 5 percent on April 10, this past week said the pound has fallen to a "competitive'' level and will stoke inflation. It is "difficult to gauge'' if the current benchmark rate is restrictive, Sentance said following a speech at the Confederation of British Industry in London in April 23.[18] "There's speculation the Federal Reserve will soon pause and inflation will delay rate cuts in the U.K. But my view is that the worst is far from being over.'' The yield on the two-year gilt rose 20 basis points this past week to 4.55 percent by 5 p.m. yesterday in London.[18]

There have been media reports that The Federal Reserve would cut interest rates by 0.25% next week and then look for a pause in the rate-cutting process to assess economic trends.[35]

By the end of the week, the dollar rose around 0.3 per cent against the yen to 104.61 yen, hitting a two-month high as markets start pricing in the possibility of the U.S. interest rates staying on hold. Range for this week: 102.65 yen to 104.81 yen (Dh0.035044-Dh0.035792).[22] As interest rates and the price of the U.S. Dollar fell, bond prices rallied from June 2007.[36] If interest rates go up, we could generally expect the U.S. Dollar to also go up in value. Therefore, to get an idea of where interest rates, and therefore the U.S. Dollar may go, it would make sense to examine the trend of bond prices. This type of intermarket analysis can be facilitated using the in ProfitSource to quickly assess the market at a single glance.[36]

One of the reasons for the volatile trading is the uncertainty surrounding U.S. Interest Rates, and the subsequent value of the U.S. Dollar.[36]

The strength in the Dollar could be reduced to perceptions that the spread between U.S. interest rates and the Euro Zone rates will begin to tighten. This thinking is forcing longs who bought in anticipation of the spread widening to liquidate their positions.[37]

The Japanese yen lost 0.7 percent against the U.S. dollar as U.S. March durable goods orders rose more than forecast. It was pushed lower as U.S. initial jobless claims unexpectedly dropped. The yen gained against the euro as the euro zone released reports of German and French business confidence falling this month.[9] The U.S. dollar extended its gain versus the euro and rose versus the yen as orders for U.S. March durable goods, (excluding transportation equipment), rose more than forecast. This signaled that demand from overseas may be helping factories weather the housing-led economic slowdown.[9]

The 15-nation euro has slid since it reached the latest in a string of records on Tuesday, breaking through the $1.60 mark for the first time and rising as high as $1.6018. It lost more than two cents after a downbeat German business confidence survey and an unexpected drop in U.S. claims for jobless benefits. UniCredit analysts said in a research note that "the U.S. dollar recovery across the board. looks fairly excessive at this stage." They noted that "nothing has really changed on the current economic scenario."[6]

BERLIN (AP) — The euro continued to slide against the dollar on Friday, dropping below $1.56 and trading more than 4 U.S. cents short of the all-time high it reached earlier this week.[6] "The dollar will continue to rebound,'' said Benedikt Germanier, an analyst at UBS AG in Stamford, Connecticut. The dollar rose 1.2 percent to $1.5630 per euro this week, from $1.5817 on April 18. It touched $1.6019 on April 22, the weakest level since the euro's launch in 1999.[13] The dollar traded at $1.5601 per euro by 7 a.m. in New York, from $1.5682 yesterday, and $1.5817 on April 18. It has gained 1.4 percent this week.[2] The dollar rose 0.5 percent to $1.5606 per euro at 4:28 p.m. in New York, from $1.5682 yesterday. It touched $1.5555, the highest level since April 3.[21]

The dollar traded at $1.5681 per euro at 6:03 a.m. in Tokyo, after increasing 1.3 percent yesterday. The 15-nation currency reached $1.6019 on April 22, the highest level since its 1999 debut.[17]

"When the euro falls, it tends to come off hard.'' The U.S. currency may strengthen to $1.5450 per euro before the Fed's meeting next week, he said.[21] Aggressive selling of the yen on longer-run positional grounds could be a mistake, especially against the euro. In the short-term however the yen could find itself on the defensive against the U.S. dollar and we could see USD/JPY rise to 108 in the next couple of weeks, if the Fed hints at a pause in its monetary easing.[11] Whether 1.50 or 1.60 will give way first could very much depend on the Fed's statement next week. Sterling has held its own over the past two days at a time when the U.S. dollar has appreciated sharply against other currencies. The pound is in effect benefiting from the fact other currencies have been excessively over-extended against the dollar and the close-out of a large quantity of these positions has seen many currencies, the euro and Swiss franc in particular, lose out spectacularly. This has automatically pushed up the value of the pound against its European rivals.[11]

USD/CAD remains range-bound between 1.00 and 1.03 and offers good value for bids on prices close to 1.0050 and for sells on prices above 1.0250. Most of the price action this week has been in the 1.01 to 1.02 price region with bias marginally favouring the upside. If the U.S. Fed signal a pause in its easing policy next week, the Bank of Canada is likely to follow suit and this could spark a major loonie rally against the euro and the yen.[11] "The Fed meeting next week may confirm that the U.S. rate cycle is close to bottoming out,'' Bilal Hafeez, global head of currency strategy in London at Deutsche Bank AG, the world's biggest currency trader, wrote in a client note today.[18]

The rand posted a fifth weekly gain against the dollar as traders bet that policy makers will lift the 11.50 percent target lending rate. The Australian dollar fell 0.9 percent to 93.17 U.S. cents, pushing its two-day drop to 1.9 percent, while the New Zealand dollar declined 1 percent to 78.05.[21] Weakness in the housing market continued, as s ales of new homes fell 8.5 percent to a seasonally adjusted annual rate of 526,000 in March as per the report by U.S. Commerce Department.[19] The report showed that new home sales fell 8.5 percent to an annual rate of 526,000 units in March from the revised February rate of 575,000 units.[26]

John Kicklighter at Forex Capital Markets cited a "momentous shift in positioning (that) offers the first signs of a major reversal after more than two years of a solid bull trend" for the single European currency. A report showing that new home sales in the United States plummeted 8.5 percent in March to their lowest level in more than 16 years did little to challenge market speculation on future Fed policy.[7] The U.S. currency increased as orders for durable goods excluding transportation equipment increased more than forecast in March, indicating parts of the economy are weathering the housing slump. "People are starting to believe that the Fed is near the end of its rate-cutting cycle,'' said Win Thin, a currency strategist at Brown Brothers Harriman & Co. in New York.[17]

Wider dollar gains and a recovery on Wall Street pushed the U.S. currency to highs around 104.50 in New York while the yen regained some ground against the Euro.[35] Wider U.S. currency gains and a dip in commodity prices pushed the Australian dollar down to lows below 0.94 in New York.[35]

LONDON (Reuters) - The dollar hit a one-month high against major currencies on Friday, and was more than four cents away from record lows against the euro set earlier in the week, boosted by improved sentiment on the U.S. economy.[25] At about 9:40 am ET, the dollar reached 1773.50 against the Colombian peso, compared to a multi-year low of 1761.10 hit on Wednesday. U.S. Treasury Secretary Henry Paulson said on Thursday that he was willing to talk in an interview with House Speaker Nancy Pelosi about her ideas for new legislation to help the U.S. economy in connection with setting up a vote on the Colombia Free Trade agreement. On the housing side, he said he was supportive of parts of a Democratic plan to expand Federal Housing Administration insurance.[29]

The Bank of Japan wants to hike interest rates in an effort to normalize the Japanese economy. The reason I think this will happen is because we are finally seeing some inflation return to the Japanese economy. It jumped to a decade high of 1.0 per cent in February. This news, along with continue support from growth throughout Asia should provide validation for the BOJ to hike rates.[38] The current account deficit is running at over 6 per cent of GDP; interest rates are 15.25 per cent; inflation is over 9 per cent a year; and Turkey is ranked number five on a list of the most vulnerable economies by Standard & Poor's. You can see why the IMF's European director, Michael Deppler, who was in Istanbul last week, said he was "rather pessimistic about the financial picture of Turkey".[39]

The dollar should continue to recover for the rest of the week, but the party may end after Federal Reserve interest rate decision and non-farm payrolls due for release.[22] While market participants expect the Fed to lower interest rates by a quarter point next week, expectations are building that it could then call a halt for the time being to any further cuts.[7] There were little reactions on the foreign exchange market. Interest-rate futures showed a 24% chance that the Fed will keep interest rate unchanged at 2.25% at its April 30 meeting, compared with 2% odds a week ago.[14] Futures on the Chicago Board of Trade showed yesterday a 22 percent chance that the Fed will hold the target rate for overnight lending at 2.25 percent on April 30, compared with 2 percent odds a week ago.[13]

The dollar will weaken to $1.6250 after the Fed's rate decision and the Labor Department's payroll report next week, the note said.[21] The firm said in a note yesterday that the dollar will weaken to $1.6250 after the Fed's rate decision and the Labor Department's May 2 jobs report, which is forecast to show payrolls contracted in April for a fourth straight month.[13]

Since the stronger than expected PPI report on April 16, the Dollar has been trading as if the next Fed rate cut on April 30 will be the last for a while.[37] The dollar strengthened as traders increased speculation that the Fed will end a series of rate cuts that began in September.[13]

Federal Reserve officials are believed to be nearing the end of a rate cutting cycle while other central banks have slowed the pace of rate increases and some could begin cutting rates, Fazio said. 'If the Fed comes to a bottom, that takes away one of the factors that's caused dollar weakness,' he said.[31] The currency has shed 4 percent versus the dollar in the past six months on speculation the Bank of England is trailing the U.S. central bank in terms of borrowing-cost reductions.[18] The central bank is likely to move towards a more neutral monetary policy directive. Japanese financial markets will be closed this Tuesday for a national holiday. The Japanese government released a report overnight that indicates exporters on average expect they can remain profitable if the U.S. dollar remains stronger than ''104.70.[16]

ECB board member Lorenzo Bini Smaghi said inflation in the euro area had reached intolerable levels and it was not acceptable to ask the central bank to ignore it. In an interview with Italian weekly magazine Il Mondo, Bini Smaghi said not all European countries shared the position of those governments who have criticised the ECB's exclusive focus on price stability.[24] Even though economic data has been slowly deteriorating, the fact that price growth is well above the ECB's target level is making the central bank increasingly uncomfortable.[22]

Euro-area M3 money supply, used by the ECB as a gauge of future inflation, grew an annual 10.3 percent, compared with 11.3 percent in February, the Frankfurt-based central bank said today.[2] South Africa's rand was the biggest gainer versus the dollar, rising 1.1 percent to 7.6187, after Governor Tito Mboweni said the central bank may call an emergency meeting on accelerating inflation.[21] "Our big problem is to make sure that inflation falls back below 2 percent next year,'' the French central bank head said in an interview on RTL radio.[13] Chilean Central Bank President Jose De Gregorio said on Friday that inflation would gradually decrease in the second half of the year.[29]

ECB'''s Trichet and Stark yesterday said the central bank'''s '''current monetary policy''' should be sufficient to deal with inflation pressures while ECB member Bonello reported '''I do not think there is anyone who is considering higher interest rates."[16] The Mexican central bank said yesterday that annual inflation in the first half of April rose to 4.53 %. This set a fastest pace since May 2005, and above the bank's forecast of 4.5 % for the second quarter.[29] The central bank is projecting 2008 inflation of 4.5 %, compared to 7.8 % in 2007.[29]

Friday morning, the European Central Bank on said that the Euro zone M3 money supply grew at a slower pace of 10.3% year-on-year in March.[29] The European Central Bank announced that Euro zone's working day and seasonally adjusted current account showed a surplus of EUR4.3 billion in February.[26]

European Central Bank policy makers said the 15-nation currency's strength is undermining growth, casting doubt on the bank's resolve to hold borrowing costs at a six-year high.[13]

The latest monetary policy meeting failed to provide any clarity on how the central bank may vote on a rate cut because the committee was split on the issue.[22]

The minutes from the Federal Open Market Committee meeting held in March gave a downbeat assessment of the U.S. economy, leaving the possibility of further cuts in U.S. interest rates intact.[19] Thursday's findings and a weak eurozone manufacturing survey on Wednesday meant that many analysts were now questioning the health of the German economy, boosting expectations the ECB will be forced to cut interest rates in the coming months.[7] Traders are reducing bets the next move by the ECB will be a hike in benchmark interest rates amid conflicting signals from ECB policymakers and signs of a weaker economy. "While most people believe the Fed is about to end its easing cycle, a growing number of investors believe the ECB may have to start cutting."[24]

Traders will be looking for clarity next week as to the short-term direction of interest rates.[37]

Some speculation over a pause in U.S. interest rate cuts undermined the Swiss currency and the rally on Wall Street also curbed short-term demand for the franc as there were no major negative surprises from the U.S. corporate earnings.[35] Slowing money-supply growth may give the ECB room to cut interest rates, eroding the appeal of euro-denominated assets.[2]

The euro continued to depreciate on Thursday, after disappointing results from the German Ifo survey. An ECB policymaker also said he saw no need to raise interest rates.[22]

Swiss National Bank President Roth said '''In essence, our confidence is based on the fact that monetary policy of the past three years has been successful in gradually normalizing the interest rate level.''' He added commodity prices '''pose a predicament in terms of monetary policy, and the resultant uncertainty this causes is not exactly beneficial for Swiss companies.'''[16]

The Aussie was also pushed a bit lower on softer commodities and lower gold prices. The New Zealand dollar weakened against most of its major counterparts as the Reserve Bank of New Zealand left its benchmark rate at a record high of 8.25 percent.[9] The euro reached a new all-time high on Tuesday at more than 1.60, but just two days later, by midday Thursday, the euro had fallen to just over 1.56. Though the move seems modest at just over 2 percent, it's a huge move for currencies, which typically are not very volatile. This swift reversal of fortune for the dollar may have been set in motion two weeks ago when representatives from the Group of Seven countries met and aired their dismay at the weakness of the dollar.[8] "Not even yesterday's horrible (US) new home sales data could jeopardize that view." ECB President Jean-Claude Trichet said Thursday that the euro's surge earlier this week to record levels "could hurt the European economy."[4] Sterling ended the week higher despite news of a bigger than expected monthly fall in March retail sales, and ended at a three-week high against the euro, driven by position adjustment and increasing concerns about the health of the euro zone economy.[22]

Bonds stayed lower even after a government report yesterday showed Europe's second-biggest economy grew at the slowest pace in three years between January and March as higher credit costs and falling house prices choked expansion. "It's a bad week for bonds as people are unwinding safe- haven bids,'' said Charles Diebel, head of European interest-rate strategy in London at Nomura International Plc.[18] With inflation in the 15-nation euro region running at the fastest pace in 16 years, the ECB is reluctant to follow the U.S. Federal Reserve in cutting borrowing costs to bolster the economy.[28] The 15-nation euro has risen 9.8 percent over the past year against a basket of currencies, according to an index from the Bank of England that's adjusted for inflation.[17] Core inflation, which excludes the prices of fresh food, also jumped by an annual 1.2 % to match expectations following a 1.0 % increase in February. Consumer sentiment fell to its lowest level in 26 years in April, according to the revised reading of the Reuters/University of Michigan consumer sentiment index that was released on Friday, with the index coming in below economist estimates.[29] The next downward target is April 1's low crossing of $876.30. The University of Michigan's consumer sentiment index was released earlier in the day, showing that consumer sentiment fell to its lowest level in more than 25 years.[40] Currently, the aussie-dollar pair is worth 0.9334. Consumer sentiment fell to its lowest level in 26 years in April, according to the revised reading of the Reuters/University of Michigan consumer sentiment index that was released on Friday, with the index coming in below economist estimates.[29]

The U.S. consumer sentiment index fell to 63.2 in early April from 69.5 in March.[19]

Next week will see the release of Japan's retail sales and German Gfk index on Monday; U.K. CBI distribution trade and U.S. consumer confidence on Tuesday; Japan's manufacturing, industrial production, unemployment rate and housing starts, German unemployment rate, eurozone business climate, HICP, unemployment rate and CPI estimate, U.K. Gfk survey, U.S. ADP employment, GDP, PCE, Chicago PMI on Wednesday; U.K. manufacturing PMI, U.S. PCE, jobless claims, construction spending and ISM manufacturing on Thursday; German retail sales, eurozone and German PMI manufacturing respectively, U.K. PMI construction and the closely watched U.S. non-farm payrolls on Friday.[14] In contrast to slightly stronger U.S. data, the Ifo German business sentiment index showed the biggest monthly fall since September 2001 on Thursday, taking the April headline number to a two-year low.[41] For details, see ID: In contrast, a reading on German business sentiment showed the biggest monthly fall since September 2001. The headline Ifo index fell to a much lower-than-expected 102.4 in April, its lowest since January 2006.[23]

The Ifo German business climate index fell to 102.4 in April from 104.8 in March and stood well below the expected level of 104.3. The indicator deteriorated for the first time in four months and reached its lowest level since January 2006.[26] Munich-based Ifo's German business climate index, based on a survey of 7,000 executives, fell to 102.4, from 104.8 in March, the institute reported April 24.[13]

German Ifo economic institute's business climate index dropped to 102.4 in April, the lowest level in two years, from 104.8 in March.[19]

What is happening? The April Ifo business survey - the monthly health check on German industry from the Ifo Institute for Economic Research based in Munich, which came out last week, shows that the general view was that it demonstrated a cooling of the business climate, and indeed it did. The euro fell back from its peak on the news. What seems to me more interesting is that the companies' assessment of the position now is so much stronger than their expectations for the future.[39] You could conclude that companies that have collectively made Germany the world's largest exporter are reasonably hopeful about the future of the global economy. Note that this is nearly nine months after the banking crisis broke and comes despite a euro at $1.60 and an oil price nudging $120 a barrel. This is not economists writing their opinions; it is real business executives reporting their views about demand for the goods and services they are producing. This is Germany and Germany is not Europe.[39] The euro hit an all-time high above $1.60 against the dollar on Tuesday as surging oil prices and hawkish rhetoric from ECB policymakers overshadowed earlier concerns about the European banking sector.[22]

The euro fell as low as $1.5584 in morning European trading, down from $1.5686 in New York late Thursday.[6] In early European trading, the euro sank to 1.5589 dollars, from 1.5685 in New York late on Thursday. It had hit a historic peak of 1.6019 on Tuesday.[4]

In midmorning European trading, the 15-nation currency bought $1.5749 _ well below the high of $1.6018 it reached Tuesday and significantly short of the $1.5896 it bought in New York late Wednesday.[42]

"The move in the euro-dollar has been driven by the change in U.S. rate expectations,'' said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York.[21] The euro-dollar pair closed yesterday's trading at 1.5684 and the pound-dollar pair at 1.9740. The dollar reversed its direction against the franc after touching a low of 1.0339 by about 11:25 pm ET. Currently, the dollar-franc pair is quoted at 1.0382, compared to 1.0357 hit late yesterday in New York.[43] In other late New York trading, the dollar rose to 1.0356 Swiss francs from 1.0158 francs, but slipped to 1.0139 Canadian dollars from 1.0175.[32]

The dollar traded at $1.5696 per euro at 12:50 p.m. in Tokyo from $1.5682 in New York late yesterday.[27] The dollar was mixed against other majors Friday morning in New York, rising further against the euro before leveling off while falling sharply against the resurgent sterling, Gold usually moves opposite the dollar because of the precious metal's hedge value.[40]

The dollar was coming off its biggest one-day gain in years versus the euro, bolstered by talk that the Fed will soon pause from cutting rates. The dollar extended its gains from the previous session against the euro in early dealing Friday, rising to a 3-week high of 1.5554 before giving back a fraction of its gains to trade at 1.5615 approaching mid-morning.[44] "The Fed may be done cutting rates after next week, and that's put a floor under the dollar,'' said Jeremy Stretch, senior market strategist at Rabobank International, the third- largest Dutch bank.[2] "The futures market has taken a massive amount of easing out of the market and thinks the Fed is done cutting after next week and that's driving momentum for the dollar," said Derek Halpenny, currency strategist at BTM UFJ.[41]

LONDON (AFP) — The European single currency fell further on Friday from this week's record dollar high as dealers continued to focus on soft economic data in the eurozone, analysts said.[4]

The dollar pared a gain as high as 0.8 percent versus the euro today on speculation the U.S. job market contracted in April for a fourth straight month, according to Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto.[21] The dollar declined slightly against the euro on Friday, mostly holding on to gains a day earlier on a report showing strength in the U.S. labor market and rising concern in Europe over sharp shifts in currency values.[27] Dollar extended gains yesterday, continuing recovery from the record low levels against the Euro, finding support in slightly encouraging data from the U.S. Labor market.[19]

Taking into account that the euro had a dramatic increase in value from 2002 to 2005, and then began a retraction period through to 2006, the above numbers confirm what Ahmadinejad has been stating, that "the dollar is not money any longer but a handful of paper distributed in the world without commodity support," and that oil is undervalued at present levels when priced in US petrodollars. No Comments/Pingbacks for this post yet.[33]

FRANKFURT, Germany - The euro slid against the U.S. dollar on Thursday after surveys said business confidence in France and Germany was dropping amid fears of slower growth.[42] Should the U.S. Bond prices follow suit, we could expect to see the price of the Euro fall as the U.S. Dollar gains strength.[36] If you look at the pair EUR/USD, the euro is the base currency and the U.S. dollar is the quote currency. By looking at this pair, you're trying to determine what a euro (the base currency) is worth in dollar terms (the quote currency).[38] Then of course it all started tumbling down in mid-1998. The same institutions who borrowed all those yen, began racing to liquidate their investment positions anywhere and everywhere to raise cash so they could pay back the US$138 billion in yen loans. All this money racing back into the yen launched a yen rally that lasted over a year. This pushed the yen's value up approximately 46% against the U.S. dollar. That's a huge move in the currency world.[38] Trend lines are one of the simplest technical analysis tools we have, and they are often overlooked, but they can be a powerful tool if applied correctly. It is worth taking a look at a similar setup on the U.S. Dollar / Japanese Yen (FXUSJY in ProfitSource) from earlier this year.[36]

The yen depreciated vis-''-vis the U.S. dollar today as the greenback tested offers around the ''104.80 level and was supported around the ''104.05 level. Traders lifted the pair to its highest level since 29 February.[16] The Swiss franc depreciated vis-''-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0430 level and was supported around the CHF 1.0300 figure. The pair reached its highest level since 3 March.[16]

The U.S. dollar was aided by a report showing durable goods orders for March, excluding transportation, increased 1.5% against expectations of a 0.5% increase.[31] Initial jobless claims for unemployment benefits in the U.S. came in at 342k, down from expectations for a 375k reading. The euro is down 0.0209 to 1.5679 against the U.S. dollar ' its worst day since December 2007.[31] As of the beginning of 2007, within five short years, euro notes in circulation have exceeded the value of circulating U.S. dollar notes. Considering that the dollar has been devalued by approximately 50% since reaching its high relative to the euro in 2000 (the euro has gained approximately 100%), we can only assume that according to global markets, the U.S. dollar is losing its perceived value.[33] Chart 2 below shows the Euro (EC-Spotv in Profitsource) also made strong gains over the same nine month period on the back of a weaker U.S. Dollar.[36]

The U.S. dollar picked up the biggest gains against the New Zealand and Australian dollar as the pairs fell to 0.781 and 0.931, respectively, with the Canadian dollar following behind amid a rise in oil prices.[12] The Australian and New Zealand dollars dropped against U.S. currencies from 0.9422 to 0.9291 and from 0.7886 to 0.7783 respectively due to the decline in commodity prices.[14] The Australian and New Zealand dollars dropped against all of the major currencies as lower commodity prices dimmed the outlook for growth.[21]

The euro had retreated further on Wednesday from a record high against the dollar after comments from European policymakers indicating that the weaker dollar is hurting euro zone growth.[22]

The 15-nation euro fell 2.4 percent against the dollar in three days after reaching the record on April 22, the biggest decline since June 2005. The euro has risen 7 percent against the dollar this year.[13] Weak German Business Sentiment data affected the Euro and supported the Dollar's advance.[19] Weak German business sentiment data released earlier Thursday also undermined the euro, which was last buying $1.5682, down from $1.5881 in late North American trading Wednesday.[10]

The dollar's advance against the euro was fueled data showing that German business confidence deteriorated for the first time in 2008.[26]

The euro versus the dollar has had a correlation of 0.96 with the price of crude oil over the past 12 months, according to data compiled by Bloomberg. A reading of 1 would mean they move in lockstep.[2]

A sharp decline in commodity prices will protect the yen as it will benefit from the subsequent unwinding of carry trades. The euro offers little or no value on any prices close to Y165 and this is the one pair where the yen may still offer real value, but the yen's wider fortunes will depend on the reaction of global markets to the Fed's policy announcement next week.[11] Range for previous week: $1.5650-$1.5950 (Dh5.7483- Dh5.8584). Range for this week: $1.5553-$1.6018 (Dh5.7142- Dh5.8850). The yen commenced the week appreciating against dollar, as investors continued to unwind their carry trade positions.[22]

At this moment, 9 currency pairs are planned to be introduced. They consist both of direct quote foreign exchange rates, such as U.S. Dollar/ Japanese Yen, and cross currency foreign exchange rates, such as Euro/US Dollar.[45] After initially consolidating above the 103.0 level against the yen in Asian trading on Thursday, the U.S. currency edged higher to around 103.70.[35] Trading unit shall be determined by OSE for each currency pair at appropriate units, to make the contract value approximately 100 million yen (e.g. 10,000 currency units in case of U.S. Dollar/ Japanese Yen).[45]

Friday, April 25, 2008 3:03:29 PM - The price of gold closed modestly higher on Friday in U.S. trading after extending a 3 1/2 week low earlier in the day.[40] The British pound was at $1.9737, down from $1.9802 Wednesday but above a Thursday session low of $1.9687. Commerce Department data showed U.S. home builders slashed their prices by a record amount, but sales still plunged by 8.5% to a 17-year low in March.[10] Yields move inversely to bond prices. Gilts pared losses yesterday after a survey showed U.S. consumer confidence fell more than forecast in April to its lowest level in 26 years.[18] Bank of America, the second largest bank in U.S. reported a fall in first-quarter profit due to write-downs and rising credit losses. U.S. consumer confidence had sunk to its lowest level in 26 years in early April, according to a report from University of Michigan/Reuters.[19]

Bank of America Corp., the second-biggest U.S. bank by assets, advised clients to sell the dollar and buy the euro in a note to clients today. [21] Earlier Thursday morning, currency strategists Adam Fazio and Shane Enright at CIBC World Markets correctly forecast the Dollar Index rally and euro sell off.[31] The Dollar Index is a weighted average of the USD against the Canadian dollar, Japanese yen, pound sterling, Swedish krona and euro (which makes up more than half the index).[31] 'The report was based on technicals, the dollar was starting to look like it would strengthen,' said Fazio. Using technical analysis, Fazio said he expects the Dollar Index to move toward 74.70 and the euro to decline to 1.55.[31]

The index fell to 102.4 points in April from 104.8 in March. A separate report showed that French manufacturers' confidence in April was down to 106 points, its lowest level since January 2007.[42] The Ifo business climate index fell to 102.4 in April from 104.8 in March and stood well below the expected level of 104.3. The indicator deteriorated for the first time in four months and reached its lowest level since January 2006.[26]

The University of Michigan consumer sentiment survey index fell to a 26-year low of 62.6 in April, down from 69.5 in March.[34] University of Michigan Surveys of Consumers' April final consumer sentiment index fell to 62.6 from March's final reading of 69.5.[14]

The University of Michigan's consumer sentiment index for April has been scheduled for release in the New York morning.[43]

"We have gone from a situation where the market was excessively pessimistic about the U.S. to perhaps a little bit complacent about what comes next,'' said Robert Sinche, head of global currency strategy at Bank of America in New York.[21] Aside from consolidating power for the new European Union, the euro added liquidity and flexibility to the financial markets which in time has made the euro a very attractive and safe investment as a major global reserve currency.[33] "The euro and energy prices are the two primary factors contributing to the breakdown in the Ifo,'' said Michael Malpede, a senior currency analyst in Chicago at MF Global Ltd., the world's largest broker of exchange-traded futures and options contracts.[17]

Because markets are forward-looking, traders undoubtedly are trying to determine where the dollar will be in the future. If they come to the consensus that what they saw this week is to continue, further commodity weakness could be seen. If they decide that the G-7 nations are acting too slowly or not at all, underlying fundamental strength in the commodity markets could be enough to overcome this week's weakness.[8] The Canadian Dollar has found support for several weeks due to the strength in the crude oil complex. With the crude oil giving back much of its gain for the week, Canadian Dollar traders have now started to focus on the bearish economic fundamentals.[37]

Traders with a taste for a little more risk bought Dollars and sold Yen. The stock market should continue to drive the direction of this pair.[37]

The currency fell to near-term lows against the dollar, sterling and yen in morning moves.[34] First resistance at 104.95 yen is near the dollar's Jan. 23 low, and second resistance at 108.62 yen is the currency's Feb. 14 low.[2]

Against the Japanese currency on Friday, the dollar rose to 104.63 yen from 104.22.[4] The British pound dropped to $1.5686 from $1.5896 the previous day, while the dollar rose to 105.26 Japanese yen from 103.52 yen.[32]

Currently, the euro is trading at 0.7944 against the pound, 1.5679 against the dollar and 163.34 against the yen.[46] In spot, dollar closed at 1.5678 (1.5887) against the euro, after trading in the range 1.5890- 1.5635.[19]

The Euro has continued its strong run into 2008, approaching the 1.6000 level last week during some volatile trading before selling off slightly last Friday night.[36] As of now, the yen is trading at 163.17 per euro, 205.50 per pound and 100.52 against the franc.[43] On other crosses, the euro was trading down 0.64 against the Japanese yen at 163.63.[31]

Against the yen, the dollar slipped to 104.08 before bouncing back at 1:20 am ET. The pair that closed yesterday's trading at 104.25 is now worth 104.42.[43]

A dollar buys substantially less in the U.S. today than it did in 1995 while 100 yen buys about the same amount in Japan as it did then," according to a recent research piece by Harvard economist Martin Feldstein. Based on this analysis, the yen (U.S. dollar-yen) would have to strengthen to 73 USD/JPY to equalize its inflation adjusted value against the dollar since 1995.[38] In early Asian deals on Friday, the Japanese yen moved sideways against the U.S. dollar.[47] While the yen moved sideways against the U.S. dollar, it weakened slightly versus the other majors.[47]

The British pound appreciated vis-''-vis the U.S. dollar today as cable tested offers around the US$1.9885 level and was supported around the US$1.9555 level.[16] The S&P; 500 closed at its highest level since Jan. 14 and the U.S. dollar strengthened for the third straight day.[31]

What has changed in that time? The perceived value of the U.S. dollar of course.[33] Recent gains in the U.S. dollar eroded demand for precious metals used to hedge against losses in the greenback.[21] The currencies weakened as the stronger dollar eroded demand for precious metals used to hedge against losses in the U.S. currency.[2]

The dollar rose as durable-goods orders excluding transportation equipment increased more than forecast last month, signaling parts of the U.S. economy are weathering a housing market slump.[2] Losses accelerated after ECB President Jean- Claude Trichet said in Frankfurt on April 24 that the euro's surge to a record against the dollar may hurt Europe's economy.[13] "Europe is really not insulated and its economy is beginning to show signs of a slowdown," Meadows said. "While most people now believe the Fed is about to end its easing cycle, a growing number of investors believe the ECB may have to start cutting rates really soon."[1] The persistent credit crunch and economic slowdown will most likely lead the Fed to cut rates by 25bps to 2.00 percent.[12] There's an 82 percent likelihood of a cut to 2 percent. The yield on the two-year Treasury note increased 0.19 percentage point to 2.38 percent on speculation the Fed is close to the end of its interest-rate reductions.[17]

The loonie has performed exceptionally well over the past two days and has recouped all of the losses it incurred (against all currencies except the greenback that is), after the Bank of Canada cut the overnight lending rate by 50 basis points to 3.0% on Tuesday.[11] The weak economic numbers are indicating another rate cut at the next Bank of Canada meeting.[37] The Bank of England is going to be under pressure again to cut rates when it meets in May and as long as the rate differential outlook continues to disfavour sterling, the pound will feel the heat, particularly following any rallies.[11]

Bank of Spain Governor Miguel Angel Ordonez said the ECB had kept rates unchanged as the best way to prevent second-round effects on inflation from imported energy costs. "At some point in 2009, we will have inflation back below 2pc," he said.[24] Having inflation at nearly 10 per cent and interest rates at 15 per cent leads to all sorts of social strains.[39] Inflation in China will continue to impact a more tightly integrated Japan, further supporting the BOJ view that interest rates in the country need to go higher, as I talked about above.[38]

The greenback rose broadly against major currencies on a growing view the Federal Reserve may stop cutting interest rates soon.[14] Federal Reserve policymakers meet for two days to set interest rate policy, with most dealers expecting anothe.[32]

If the worst of the credit crisis has passed, a return to normality could raise the prospect of an increase in Japanese interest rates later in the year.[11] Interest Rates have an inverse relationship with bond prices as interest rates go up, bond prices come down, and vice versa.[36] In comments on Wednesday, for example, Bonello who represents Malta stated that it was hard to argue for higher interest rates.[35]

Against the Euro, the Japanese currency traded at 163.47 at 7:00am GMT. Rising stock market is pushing investors''' confidence up, leading to a decrease of the Japanese currency against the South African Rand. Carrying trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the spread between both. The UK will reveal today its GDP, which is expected to slow down a bit, having a negative impact in the nation'''s currency. [15] Looking ahead, we expect major event risks for the currency markets as 1 st Quarter GDP figures are due out for on Wednesday at 12:30 GMT, and will be followed by the FOMC rate decision at 18:15 GMT. We expect the rise in volatility to carry throughout the rest of the week as the ISM Manufacturing index will be released on Thursday at 14:00 GMT, with the major events for the week coming to an end on Friday after the Non-Farm Payroll release at 12:30 GMT.[12]

The U.S. currency was at 104.38 yen, from 104.26 yen and 103.26 yen a week ago.[2] U.S. currency rose to 104.82 and 1.0431 against the Japanese yen and Swiss franc respectively.[14]

The euro moved lower vis-''-vis the yen as the single currency tested bids around the ''162.65 level and was capped around the ''163.80 level.[16] The euro moved lower vis-''-vis the Swiss franc as the single currency tested bids around the CHF 1.6140 level while the British pound moved higher and tested offers around the CHF 2.0625 level.[16]

Between now and then we may range between 1.55 and 1.5750, but if the dollar breaches the 1.5550 support level, the pair could conceivably fall to 1.5341, the point which is the next proven level of euro support.[11] French President Nicolas Sarkozy said in a nationally televised interview yesterday on TF1 and France 2 that the euro has reached an "incredible'' level against the dollar.[17]

No comments posted. After a prolonged bear market for the dollar, especially against the euro, a swift and strong reversal was seen this week.[8] The euro has gained 11 percent against the pound and 8 percent against the dollar in the past six months.[18] The yen actually appreciated even more against the euro, pound and Australian dollar over the same period.[38] In London on Friday, the euro changed hands at 1.5589 dollars against 1.5685 late on Thursday, at 162.93 yen (163.50), 0.7887 pounds (0.7943) and 1.6207 Swiss francs (1.6237).[4]

The metal strengthened on Tuesday as crude oil hit a record high and the dollar hit a record low of 1.6023 against the euro.[40] The Japanese currency fell to a short-term low against the pound and also moved to a multi-week low against the dollar before rebounding.[40] The Australian dollar fell for the second straight day to 1-week low against the greenback.[29]

The prices then rapidly increased, more than tripling by September 2000 (35 dollars per barrel), then fell until the end of 2001 before steadily increasing."[33] The price of the 4.75 percent security due June 2010 fell 0.41, or 4.1 pounds per 1,000-pound ($1,983) face amount, to 100.40.[18] Implied volatility on dollar-yen options expiring in one month with a strike price near current levels fell to 12.4 percent today from 24 percent on March 17, the highest since January 1999.[2] The report showed that durable goods orders fell 0.3 percent in March following a revised 0.9 percent decrease in February.[26] The Department of Commerce released its report on new home sales in the month of March, showing that sales of new one-family houses fell by much more than economists had been expecting to a 17-year low.[26] There was no evidence of recovery in the housing sector with new home sales falling to a fresh 17-year low annual rate of 526,000 in March from a revised 575,000 rate the previous month while inventories continued to increase.[35]

Feelings are mixed as to whether the BoE will continue to cut rates as retail sales were stronger than expected in March. This indecision is partly the reason for the sideways to lower trade.[37] "The data suggested that the ECB is not going to be raising rates, and may even have to cut rates.[32]

ECB member Bini Smaghi said the ECB cannot ignore the '''intolerable levels''' of inflation. Other data saw German March import prices up 0.4% m/m and 5.7% y/y.[16] Data released in Japan overnight saw March core inflation accelerate to a ten-year high of 1.2% on account of escalating energy prices, the sixth consecutive monthly increase.[16] Core inflation, which excludes the prices of fresh food, also jumped by an annual 1.2 percent to match expectations following a 1.0 percent increase in February.[43] Japan's annual inflation accelerated to a 10-year high of 1.2 percent in March, the Ministry of Internal Affairs and Communications said today, marking the largest annual increase since a 1.8 percent on-year jump in March 1998.The reading was exactly in line with analyst expectations following an increase of 1.0 percent in February.[43]

In Spain, the statistical office INE reported that producer price annual inflation rose faster than expected in March.[26] Germany's index of import prices increased 5.7% year-on-year in March, slower than the 5.9% expected, the Federal Statistical Office reported Friday.In February, import prices rose 5.9% followed by 5.2% increase in January.[44] Industrial price index rose 6.9% year-on-year in March, marking a faster pace than the 6.7% expected.[26]

The dollar index, which tracks the greenback's performance against a basket of major currencies, rose to a one-month high of 73.021.DXY.[41] The dollar index, which measures the U.S. unit against a basket of major currencies, was at 72.539, up from 71.848 Wednesday.[10]

"The U.S. data today is pretty clearly dollar positive and we're coming off some weaker European data."[23]

Economists had been expecting claims would rise by 3,000. In addition to the jobs data, the Ifo institutes closely watched monthly survey showed business confidence in Germany, Europes biggest economy, dropping to its lowest level for more than two years in April after three consecutive increases. [32] Traders considered data that showed the UK economy registered an annual growth of 2.5% in the first quarter.[34] The buck raced lower against the sterling Friday morning after government data showed that the UK economy registered an annual growth of 2.5% in the first quarter.[44]

Germany looks like being a clear winner. Not only is it unencumbered by a mass of housing debt, but the structure of its export industries and its close economic ties with the fast-growing Eastern Europe will see it gaining ground within the EU. It will grow faster than France and much faster than Italy this year and quite possibly next too. Another message is that since there is still reasonably strong demand for German goods, the world economy must be growing reasonably strongly too. You could almost say that this is not a global downturn at all; it is a developed-world downturn, hitting some parts harder than others. It is certainly far from a universal phenomenon. What about the duration of this downturn? Assuming there is no sudden drop in growth in China, always possible but not in sight at the moment, the key factor will be how long it takes for the set of complicated adjustments to happen in the hardest-hit economies.[39] Eastern Europe? Well, yes. While only 3 per cent of Turkey's land area is in Europe and EU membership remains over the horizon, the economy is now fully integrated into the European one and the numbers are very similar to those of the EU's new member states. It has been growing at between 4 per cent and a peak of 9 per cent for the past six years. Even this year it seems likely to grow at more than 4 per cent.[39]

Quarter 1 GDP out of the UK was in line with forecast, rising 0.4% on the quarter and 2.5% on the year. The UK economy, despite the ghastly picture painted, performed reasonably well under the circumstances and has out-performed the U.S. economy significantly thus far this year.[11] The economy expanded 2.5 percent from a year earlier. The International Monetary Fund earlier this month forecast the U.K. economy to expand 1.6 percent this year, the least since 1992, when Britain had its last recession.[18]

The weak results are concerning to investors, as consumer spending makes up 70 percent of the U.S. economy.[40] Earlier, the unexpectedly weak result from the Bank of America had dampened the investors in the banking sector and also added to concerns about the U.S. economy.[19]

The ECB officials spoke after a much weaker-than-expected German business sentiment reading raised further questions about the ongoing resilience of the eurozone economy. [10] Business confidence in France, the second largest euro zone economy, also fell more than expected in April.[26]

In Germany, a reading on business sentiment showed the biggest monthly fall since September 2001. The headline Ifo index fell to a much lower-than-expected 102.4 in April, its lowest since January 2006.[3]

In a statement, the ONS said, 'Underlying growth in retail sales remains robust, driven by the food sector'. Elsewhere, the Industrial Trends Survey of Confederation of British Industry showed that UK manufacturers reported that domestic and export prices are growing at their fastest pace since 1995. Similar rates are expected over the coming three months.[26] In eurozone news, the EMU-15 M3 money supply growth rate fell to an annualized 10.3% from 11.3% in February.[16] The three-month average of the annual growth rates of M3 from January to March declined to 11.1% from 11.5% in three months to February.[29]

The shift in expectations is a positive development for the dollar because lower Fed rates tend to lead investors to sell the dollar and buy assets that pay higher yields. [30] Markets think the strength of the euro also limit the scope for widening the gap between ECB and Fed rates.[24] The May fed funds futures contract is implying an 80% chance the target rate will be at 2% and a 40% chance that it will be at 1.75%.[16] The July fed funds futures contract is pricing in a 100% chance the federal funds target rate will be 25bps lower at 2.00% after the Federal Open Market Committee meetings on 30 April and 25 June along with a 50% chance that it will be at 1.75%.[16]

This market comment is prepared by Union Bank of California's Global FX & Derivatives Department for the general information of its customers. It is based of the most accurate information currently available, but should not considered investment advise or a guarantee of future exchange rate or trends.[9]

Traders are intensely debating whether Bank of England is more likely to reduce the repo rate by another 25bps in May or June.[16] The GBPUSD traded mostly lower for the week as traders were trying to digest the Bank of England's plan to buy back poorly performing mortgages.[37] Despite comments from the ECB that it will do anything to control inflation, traders would not bite on the breakout above 1.60 earlier in the week.[37] Now that you have the basics, are you ready to place your first trade? Jack Crooks has made it easier than ever. With his Money Trader forex-trading service, he sends out easy-to-follow trading instructions every week. He tells you what currencies to buy, how much to buy and even what you should say to your broker to place the trade.[38] Bullion finished at $889.40, down $19.60 and touched as low as $885.30 in mid-day trading, a 22-day intraday low. Gold's decline added to its sharp drop from Wednesday when the metal closed down $16.20 on the session. That reversed gains from earlier in the week.[40] Gold for June delivery moved to $889.70, down 30 cents for the day. The metal reached as low as $880.00 in electronic trading, its lowest level since April 1.[40]

By the time that the euro was launched as physical coins and banknotes in January 2002, oil was trading at approximately $20 a barrel, and at present, on 23 April 2008, oil is trading at $118 a barrel.[33]

Together with a soft euro zone manufacturing survey, the data knocked the euro off record highs above $1.60 set at the start of the week.[25] The euro has lived a charmed life in recent weeks because the penetration of the 1.60 price barrier was achieved because of an aggressive determination by a more illiquid market to see the mark being hit, moreover any radical shift favouring the euro in the underlying fundamentals.[11] The Ifo Institute noted that business confidence weakened on account of higher oil prices and stronger euro.[26] After climbing above $1.60 for the first time on April 22, the euro logged the biggest three-day decline since 2005 as German and French business confidence dropped.[13] The bank forecasts the euro will trade at $1.55 in one month and at $1.47 in three months.[3] The euro rose as high as $1.6018, more than a penny above the $1.5916 it bought late Monday.[5]

"The strength of the euro is a reflection of the dollar's weakness," Bini Smaghi said. "Recent fluctuations are worrying for their potential impact on economic and financial stability.''[24] "Dollar weakness had boosted speculative investment in oil,'' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., Japan's third- largest bank by assets.[2] Is there more opportunity in the yen against the dollar - absolutely! But, what's even more exciting is the fact that I expect the yen to rally even faster against yet another major currency - setting the stage for some very exciting long-term profits in the currency market.[38] The UK currency also found support below the 1.97 level against the dollar, butt here was a net loss for the day.[35] The dollar found support below the 1.0150 level on Thursday and strengthened strongly to a peak above 1.0350 which was the highest level since early March.[35] Analysts suggest that the yen has already soared too high. They're saying 100 yen to a single dollar is far enough, because that's the level the yen hit back in 1995.[38] The dollar may rise to 108.62 yen provided it breaks above 104.95 yen, the report said.[2]

The Dollar finished the week by posting its biggest three-day rally in almost three years.[37] According to data released today by the Ministry of Internal Affairs and Communications, core consumer prices in Japan increased 1.2 % in March compared to one year earlier.[47] If you consider that "between 1995 and 2007, consumer prices in the U.S. rose 37% but remained virtually unchanged in Japan.[38]

The U.S. currency secured a wider recovery which triggered some profit taking while there was also a dip in metals prices which curbed demand for the local currency.[35] The Swiss franc fell yesterday against all of the major currencies as rising U.S. stocks persuaded investors to sell the currency to buy higher-yielding assets outside Switzerland.[17] The number of U.S. workers filing initial claims for unemployment benefits unexpectedly fell last week, the government said.[23] According to the release by U.S. Labor Department yesterday, initial claims for state unemployment benefits fell sharply by 33,000 to 342,000 for the week ended April 19, against the expectations for a modest rise.[19]

Oil prices had a recent low point in January 1999 at $8 per barrel, after "increased oil production from Iraq coincided with the Asian financial crisis, which reduced demand. [33] On the London Bullion Market, the price of gold firmed to 882 dollars per ounce from 895.50 dollars late on Thursday.[4] One will be energy and commodity prices. If these remain high, that says demand is being maintained - it says there is growth somewhere in the world. A second is world trade. This has been growing at 7 to 8 per cent a year in volume through the boom and it is going to come down to perhaps half that. These, though, are both co-incident indicators in that they tell you what is happening rather than what is going to happen.[39]

Sales are plunging because tax has been increased and, as part of the country's heritage, Turkey is trying to get Brussels to allow it to cut the tax. At least there is discipline on taxation. There is no such EU-imposed discipline on fiscal and monetary policy. Does this matter? We in the UK have managed to establish a set of fiscal and monetary rules which, although bent at the edges, have allowed Britain to combine relatively rapid growth with low inflation. It can be done.[39] Gilts dropped on speculation the Bank of England will slow the pace of interest-rate cuts on concern inflation is accelerating.[18]

Just over a week ago, the futures pricing was evenly split between a 25 and a 50 basis point cut.[25] There is a 76% chance policy makers will cut rate by a quarter-percentage point to 2.00%.[14]

The breakeven rate, or yield spread between 10-year gilts and inflation-protected bonds of the same maturity, rose to 3.45 percentage points yesterday, from 3.19 percentage points at the start of the year.[18]

"The overall macro picture still points to pound weakness against the dollar,'' said Jim McCormick, head of global currency strategy in London at Lehman Brothers Holdings Inc. "We continue to remain short the pound against the dollar.''[18] "The flattening yield curve comes in line with the Fed getting more concerned about the inflation outlook,'' BNP Paribas analysts led by Hans-Guenter Redeker, London-based global head of currency strategy, wrote in a research note yesterday.[2]

Formerly editor-in-chief of Futures Magazine, Darrell Jobman has been writing about financial markets for more than 35 years and has become an acknowledged authority on derivative markets, technical analysis and various trading techniques for currency futures, currency future trading and commodity currency future trading.[35] Gold for immediate delivery, trading at $887.20 an ounce, headed for a weekly drop of 2.7 percent.[21]

More than 80 percent of German exports are priced in euros, BGA President Anton Boerner said.[28] The unexpected decrease in durable goods orders was due in large part to a 4.6 percent decrease in orders for transportation equipment, which followed a 2.1 percent decrease in February. Before the opening bell on Wall Street, the Department of Labor released its report on initial jobless claims in the week ended April 19th, showing that jobless claims unexpectedly decreased compared to the revised data for the previous week.[26] Sterling fell against the dollar yesterday on weaker retail sales data and also due to the strong recovery in the counterpart.[19] In late New York trade, the dollar stood at 1.0349 Swiss francs from 1.0162 on Wednesday.[7] In other news, chief executive officer of European automaker Volkswagen AG Martin Winterkorn said 'the high - and still rising - euro/dollar exchange rate' is hurting the company.[26] U.S. economic data releases Thursday also contained a few kernels of good news.[10] The stock markets reversed early morning losses as Ericsson posted an increase in U.S. sales, and ended the week in positive territory as the markets climbed for the third consecutive session.[12] According to him, the central bank's Special Liquidity Scheme, launched earlier in the week, should ease current funding pressures.[26]

The yen that closed yesterday's deals at 163.49 against the euro reached a low of 163.67 at about 9:55 pm ET Thursday. [47] The aussie is now worth 1.6737 per euro, 97.68 against the yen, 0.9520 against the loonie and 0.9354 versus the greenback.[43]

SOURCES

1. FOREX-Dollar cruises toward best month in 2-1/2 years | Currencies | Reuters
2. Bloomberg.com: Europe
3. FOREX-US dollar gains on economic data; euro slides | Currencies | Reuters
4. AFP: Euro slips under 1.56 dollars after record-breaking week
5. 13abc.com: Euro breaks through $1.60 as dollar slumps to record low 4/24/08
6. The Associated Press: Euro drops further
7. AFP: Dollar gains amid talk of Fed rate pause
8. FUTURES FILE: Dollar surges as overseas governments get involved / nwi.com
9. The US dollar extended its gain versus the euro and rose versus the yen
10. CURRENCIES: Dollar Extends Gains After Comments From ECB Officials
11. Currency Focus - By
12. US Dollar Buoyed by Inflationary Concerns
13. Bloomberg.com: Worldwide
14. Dollar rises to three-week high versus euro - Apr 25 - Forex News | IBT FX Center
15. The Dollar is recovering
16. U.S. Forex Market Commentary
17. Bloomberg.com: Worldwide
18. Bloomberg.com: U.K. & Ireland
19. Dollar climbs higher supported by Labor data
20. INDEPENDENT online
21. Bloomberg.com: Worldwide
22. Gulfnews: Dollar rebounds after grim euro zone economic data
23. CORRECTED - FOREX-Dollar rises after economic data; euro slides | Currencies | Reuters
24. Mixed signals from ECB but market stops betting on further interest hike - European, Business - Independent.ie
25. Dollar index at 1-mth high, Fed cut uncertain | Markets | Hot Stocks | Reuters
26. RTTNews - Realtime Economic News, Global Economic News and Reports, Asian Economic News, Economic Calendar.
27. Dollar Declines Holds on to Gains - Forex News | IBT FX Center
28. German business confidence declines - Turkish Daily News Apr 25, 2008
29. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
30. Free Preview - WSJ.com
31. Canadian Economic Press - Welcome
32. Dollar gains against euro, pound on drop in jobless claims - International Herald Tribune
33. Voices - The collapse of the United States is accelerating: Oil in Euros vs. US
34. Forex Latest News - Euro Slips Against Other Majors
35. Daily currency analysis - Apr 27 - Forex News | IBT FX Center
36. Foreign Exchange: Interest Rates - Optionetics Commentary
37. Interest Rate Differential Expected to Tighten Between U.S. and Euro Zone - Forex News | IBT FX Center
38. My Two Cents: Why the Yen Could Leap AT LEAST 21% in the Coming Months
39. Hamish McRae: If Germany offers a window on global financial health, then the view is good - Hamish McRae, Business Comment - The Independent
40. RTTNews - Forex News top stories, Forex Trading, European Market Update, Currency Market Update, Forex trading.
41. FOREX-Dollar index at 1-mth high, Fed cut uncertain | Markets | Markets News | Reuters
42. FOXNews.com - Euro lower against US dollar - Business And Money | Business News | Financial News
43. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
44. Forex Latest News - Dollar Mixed Versus Majors Ahead Of Consumer Sentiment Reading - Update
45. Osaka Securities Exchange: Establishment Of Exchange FX Margin Market
46. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
47. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .

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