The dollar rose to a two-week high against the euro and increased
versus the yen after Federal Reserve Chairman Ben S. Bernanke said the
central bank is ``attentive'' to the implications of the currency's
decline.
Traders interpreted the remarks as a sign that policy makers are done
cutting interest rates as the weakened dollar causes the price of
imports including crude oil to rise, sparking inflation. The U.S.
currency has tumbled 9 percent against the euro and the yen since the
Fed began cutting the target lending rate on Sept. 18.
``It could be a turning point for the dollar,'' said Michael Woolfolk,
senior currency strategist in New York at Bank of New York Mellon, the
world's largest custodial bank, with more than $20 trillion in assets
under administration. ``It's very unusual for a sitting Fed chairman to
talk about the dollar explicitly.''
The dollar has increased 3.5 percent since touching the all-time low of
$1.6019 per euro on April 22, as the Fed signaled it will stop cutting
interest rates. It has arranged $39 billion of financing to facilitate
the takeover of Bear Stearns Cos. by JPMorgan Chase & Co.
The Fed is working with the Treasury to ``carefully monitor
developments in foreign exchange markets'' and is aware of the effect
of the dollar's decline on inflation and price expectations, Bernanke
said via satellite to the International Monetary Conference in
Barcelona, Spain.
``Bernanke is now saying that he also has an interest in the level of
the currency,'' said Torsten Slok, a U.S. economist with Deutsche Bank
AG in New York, the biggest currency trader. ``If the last bastion of
dollar weakness -- U.S. indifference -- is falling away, the dollar may
rally.''
The dollar will strengthen to $1.49 against the euro by the end of the
year, according to the median forecast of 44 economists surveyed by
Bloomberg News. It's expected to increase to 105 yen.
EUR/USD: fell from $1.5630 to
$1.5410..
GBP/USD: slumped from $1.9740 to a low at $1.9600, rebounding later till $1.9650.
USD/JPY: gained fromY103.85 to a high at Y105.55 with a close level around Y105.00.
The U.S. currency's gains against the euro may erode before the
European Central Bank's meeting on June 5 and the U.S. Labor
Department's payroll report the next day, according to Marc Chandler,
global head of currency strategy at Brown Brothers Harriman & Co.
in New York.
The ECB will keep its main refinancing rate at a six-year high of 4
percent, according to all 59 economists surveyed by Bloomberg News. The
U.S. probably lost 60,000 jobs in May, after a decrease of 20,000 the
prior month, according to the median forecast of 78 economists in a
separate Bloomberg survey.
The U.S. currency fell earlier against the euro on speculation credit market losses will widen.
Lehman Brothers Holdings Inc. may seek as much as $4 billion by selling
common stock, the Wall Street Journal reported, citing unidentified
people with knowledge of the matter. Lehman spokesman Mark Lane
declined to comment. S&P downgraded the credit ratings of Lehman,
Morgan Stanley and Merrill Lynch & Co. yesterday, saying they may
disclose more writedowns for devalued assets.