The
euro headed for its biggest two- day gain versus the dollar since March
after German business confidence unexpectedly rose, bolstering
speculation the European Central Bank won't cut interest rates.
The British pound fell against all of the major currencies after
minutes from this month's Bank of England meeting signaled policy
makers remain reluctant to lower interest rates to stimulate growth.
Currencies of commodity-exporting nations including Australia and
Canada surged as crude oil rose above $132 a barrel.
``The euro is heading back to $1.60,'' near the all-time high of
$160.19 set on April 22, said Adam Boyton, a senior currency strategist
in New York at Deutsche Bank AG. ``Interest- rate differential and high
oil prices are supporting the euro.''
``The dollar rally was a bit premature,'' said Robert Sinche, head of
global currency strategy at Bank of America Corp. in New York, in an
interview on Bloomberg Radio yesterday. ``There have been some glimmers
of hope that maybe the U.S. economy was not as soft as some previously
thought, but we think that conclusion was a bit premature.''
The minutes of the Federal Reserve's April 30 meeting, to be released
today, may show policy makers voiced concern that rising commodity
prices could fan inflation. Central bankers at that session cut the
benchmark interest rate for overnight loans between banks by a
quarter-percentage point to 2 percent.
Futures on the Chicago Board of Trade show traders see an 88 percent
likelihood the Fed will keep its target rate for overnight lending
between banks at 2 percent on June 25. The balance of bets is for a
reduction to 1.75 percent.
``It is understandable for the dollar to weaken,'' said Satoru
Ogasawara, foreign exchange analyst and economist at Credit Suisse
Group in Tokyo. ``The Fed thinks downside risks to the economy are
persistent.''