The dollar snapped two days of declines against the
euro, rallying from the lowest level in a month, as traders added to
bets the Federal Reserve will raise interest rates by year-end and oil
retreated.
The U.S. currency also gained versus the yen after minutes of the Fed's
April meeting yesterday showed most policy makers viewed the cut in the
target rate to 2 percent as ``a close call,'' indicating the central
bank has gone on hold to stem inflation.
U.S. house prices fell less than expected in the first quarter. The
Office of Federal Housing Enterprise Oversight said its house price
purchase index declined 0.2 percent, after rising 0.3 percent the
previous quarter. The median forecast in a survey of 13
economists was for a drop of 1.3 percent.
Futures on the Chicago Board of Trade show traders see a 92 percent
likelihood the Fed will keep its target rate for overnight lending
between banks at 2 percent on June 25, up from odds of 88 percent
yesterday. Traders also see a 32 percent probability the Fed will lift
the rate in September to 2.25 percent, up from a 21 percent chance
yesterday.
The dollar has fallen 2 percent against the euro since May 8, after
European Central Bank President Jean-Claude Trichet said inflation
remains the bank's top priority. That signaled policy makers won't cut
the 4 percent benchmark interest rate soon.
The pound rose to a three-week high
against the dollar after a government report showed U.K. retail
sales declined less than forecast in April.