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. The New Zealand dollar rose
against all of the major currencies after tax cuts reduced the need to
lower rates.
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.
Gains for the dollar may be limited as the market starts to focus on
the Fed's downgrade of its 2008 economic growth estimate, which
accompanied the minutes yesterday, wrote Derek Halpenny, head of
currency research at Bank of Tokyo-Mitsubishi in London, in a note to
clients today.
The European single currency may rise to $1.5850 against the dollar in
one week, based on charts used to predict price movements, said Masashi
Hashimoto, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ
Ltd.
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.