The dollar headed for its biggest weekly gain versus the euro in three
years as traders bet the Federal Reserve will increase borrowing costs
this year and Irish voters may have rejected a European Union treaty.
The U.S. currency rose to a one-month high against the euro on bets
Group of Eight finance ministers meeting this weekend will signal they
favor a stronger dollar. The yen was poised for a fifth weekly drop
against the euro after the Bank of Japan left its target lending rate
at 0.5 percent, the lowest among industrialized nations.
``People will likely keep pricing in Fed rate hikes,'' said David
Powell, a currency strategist at Bank of America Corp. in New York.
``That will help the dollar.''
Fed funds futures on the Chicago Board of Trade show a 60 percent
chance the central bank will increase the 2 percent target lending rate
by at least a quarter-percentage point at its August meeting, compared
with 9 percent odds a week ago.
The 15-nation euro weakened as Irish opponents of a new European Union
treaty led as counting got under way in a referendum that may decide
whether the 27-nation bloc moves toward political unity.
``The rejection of the treaty undermines the EU's public legitimacy and
may influence public sentiment in countries contemplating joining the
euro zone,'' wrote Geoffrey Yu, a currency analyst at UBS AG, in a note
to clients today. ``This change may undermine the ECB's price stability
mandate in favor of a growth mandate.''
Consumer prices rose 0.6 percent in May after a 0.2 percent increase
the prior month, the Labor Department reported today in Washington. The
median forecast of 84 economists was for a
0.5 percent advance.