Euro-dollar gains extended tagainst a backdrop of fresh
remarks from ECB's Trichet that track earlier commentary and show no
let-up in the ECB Pres. stance on inflation and price concerns.
The dollar rose against the yen for the first time in six days as traders speculated the Federal Reserve won't cut interest rates next month.
The currency increased from a three-week low versus the yen as a chart
traders use to predict price movements signaled last week's 2.4 percent
decline was too large to be sustained. The yen dropped against the
South African rand and the Brazilian real as speculation the worst of
the financial crisis is over led investors to buy higher-yielding
assets funded in Japan.
``It's not going to be an express train toward a much stronger dollar,
but it will trade stronger slowly and gradually,'' said Jeff Gladstein,
global head of foreign- exchange trading at AIG Financial Products in
Wilton, Connecticut. ``The U.S. is not going to have as deep a downturn
as everyone initially portrayed.''
Futures on the Chicago Board of Trade show an 84 percent chance the Fed
will hold its target lending rate at 2 percent at its next meeting on
June 25, up from 82 percent odds on May 9. The balance of bets is for a
cut of a quarter-percentage point. There's a 10 percent chance of an
increase to 2.25 percent in September. The central bank has lowered the
fed funds target 3.25 percentage points since September.
``It's doubtful that the Fed can afford to cut more,'' said Benedikt
Germanier, an analyst at UBS AG in Stamford, Connecticut, in an
interview on Bloomberg Television. ``We are short on the euro-dollar.
Our three-month forecast is $1.47.''
Chicago Fed President Charles Evans said in a speech today in Illinois
that the central bank's current interest-rate stance is
``appropriate.''
The pound increased
from a two-week low against the euro and climbed versus the dollar
after a surge in U.K. producer prices led traders to reduce bets that
the Bank of England will cut its 5 percent target lending rate next
month.