Dollar rises despite lack of news
June 22, 2006
Analysts were at a loss on Thursday to figure out exactly why the US dollar rallied. While some said that the greenback was benefiting from the unwinding of carry trades by US-based hedge funds and others cited greater interest rate differentials, others discounted these explanations. Still others simply termed the rally an “aberration”.
The US currency was up 0.6 percent versus the euro to $1.2590, while it gained 0.7 percent against the Swiss franc to SFr1.2413, added 0.8 percent to $1.8305 in relation to sterling, rose 0.9 percent to C$1.1181 versus the Canadian dollar, and advanced by 1.2 percent against the Japanese yen to ¥116.15. These gains included a seven-week high versus sterling and a two-month high in relation to the yen.
The US dollar also rose even more against some emerging currencies. The greenback added 1.4 percent to $0.6109 in relation to the New Zealand dollar, while it gained 1.9 percent to TL1.692 versus the Turkish lira and it was up 2.3 percent to R7.2999 in relation to the South African rand. The gain in relation to the Turkish lira took the US dollar to a three-year high against that currency, and the gains versus the kiwi and the rand came after both nations announced current account deficits that were much higher than they had been previously.
Dollar rallies on data, perceptions
June 9, 2006
The US dollar strengthened against some currencies over the week, helped by interest rate differentials, the perception of Treasury bonds as a safe place for investors to put their money, and a US trade deficit that didn’t widen as much as analysts had feared it would.
The greenback was up 2.2 percent to $1.2636 during the week versus the euro. The US currency also added 2.2 percent against sterling to $1.8428, while it was up 2.1 percent in relation to the Swiss franc to SFR1.2307 and gained 1.9 percent to ¥113.81 versus the Japanese yen. The Canadian dollar limited it’s loss to the US dollar to 0.5 percent as it gained 1.4 percent on Friday to C$1.1068.
Emerging currencies also lost ground to the dollar, with the exception of the Turkish lira, which added 1.8 percent versus the greenback to TL1.534. Otherwise, the Indian rupee dropped 0.3 percent versus the US currency to Rs45.81, the South African rand lost 0.5 percent to R6.6913, and the South Korean won and the Thai baht each lost 0.7 percent to the greenback, to Won 9054.4 and Bt38.32 respectively. The Mexican peso also dropped 0.7 percent to the US dollar, to 11.381 pesos, a 19-month low. The Icelandic krona lost 3.9 percent versus the greenback, to IKr73.90.
Comments lead to rate hike expectations
June 7, 2006
The US dollar strengthened for a third straight session on Wednesday as officials of the Federal Reserve continued to make comments indicating that interest rates will likely be raised again when the Fed meets later in the month. Several regional Fed presidents as well as Fed chairman Ben Bernanke have said in recent days that inflation is now at the upper end of what has been referred to as the “comfortable” range. Earlier, analysts had been convinced that the Fed would break its chain of 16 consecutive rate hikes.
The greenback added 0.4 percent to SFr1.2270 in relation to the Swiss franc, 0.2 percent to $1.2796 versus the euro, and was up 0.1 percent each against the Japanese yen and against sterling, to ¥113.37 and $1.8575 respectively. Additionally, the US currency added 0.3 percent to T$32.166 versus the Taiwan dollar and was up 0.6 percent to Won947.9 in relation to the South Korean won.
Analysts are not in agreement as to whether the dollar will continue to strengthen or whether it will begin to weaken again. While some feel that the dollar will continue to strengthen, others believe that if the Fed continues to raise interest rates, it will harm the US economy, affect the global economy, and will weaken the greenback further.
Analysts expect US interest rate hike again in June
June 1, 2006
The US dollar was a bit stronger on Thursday, but it had been stronger still before some data hinted that concerns about inflation were at least partly misplaced. The Institute of Supply Management’s May survey had US factory activity at 54.4, lower than the 55.5 reading that had been expected. In addition, unit labor costs for the first quarter came in at a 1.6 percent gain, year-on-year. This was lower than the 2.5 percent rise reported last month and lower than the gain of 1.9 percent that had been expected.
Still, with the release of the minutes from the US Federal Reserve meeting in May showing that the Open Market Committee had considered lifting interest rates by 50 basis points at that time, most analysts now expect another rate hike this month. US interest rate hikes have been coming in 25 basis point increments since the current cycle of increases began.
All this news combined to give the greenback a gain of 0.2 percent to $1.2821 versus the euro and sent it 0.3 percent higher in relation to the Japanese yen, to ¥112.43.
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