US dollar advances
February 6, 2006
The US dollar was up on Monday amid expectations that US interest rates will rise further in the foreseeable future. The greenback gained 0.5 percent in relation to the euro, to $1.1971. It was up 0.9 percent to $1.7467 against sterling, a one-month high. However, the dollar held steady in relation to the yen at ¥118.90.
Analysts at Goldman Sachs repeated the view that US interest rates will hit 5 percent and raised its estimate of first quarter growth of the gross domestic product to 4.5 percent, from a previous estimate of 3.5 percent GDP growth. Other estimates of interest rate hikes see the rates going even higher. Brown Brothers Harriman said that it believes interest rates will reach a level somewhere between 5 and 5.5 percent. These conditions are expected to support the dollar.
However, Citigroup feels that the dollar has gone about as high as it will go, citing rising Treasury yields, a slowing housing market in the US, and the impending announcement of a new record high US trade deficit as being dollar-negative.
Fed takes interest rates to 3.5 percent
August 9, 2005
As had been expected, the US Federal Reserve Open Market Committee has raised its benchmark interest rate to 3.5 percent as it said it would continue to raise rates at “a measured pace.”
Most analysts take that phrase to mean three more increases before the end of the year, which they expect to take the rate to 4.25 percent.
The Fed is raising interest rates in an attempt to keep inflation in check. It is expected that banks will soon follow the Fed by raising their prime rate, for consumer and business loans, by the same quarter of a percentage point to 6.5 percent.
That would raise the prime rate to its highest point in four years. In its statement that came along with the rate hike, the Fed said that while core inflation has remained relatively low in recent months and expectations for long-term inflation remains contained, pressures toward inflation also persist.
It also said that spending has risen despite high oil prices and that the labor market appears to be improving. Tuesday’s increase in the internet rate is the tenth since last summer, and it returns the rate to its position just before the New York and Washington terrorist attacks of September 11, 2001. The Fed next meets on September 20.
Dollar rises against foreign currencies
June 9, 2005
The dollar was up on Thursday in relation to the euro, the yen, sterling, and the Canadian dollar on Thursday.
The dollar was up 0.4 percent against the euro to $1.2177. It was rose by 0.5 percent against the yen to ¥107.76, gained 0.3 percent to $1.8176 against sterling, and advanced by 0.5 percent to C$1.2579 in relation to the Canadian dollar.
Predictions from JP Morgan that interest rates would stand at 4.25 percent by the end of the year and that the dollar would strengthen to $1.18 in relation to the euro and to ¥110 against the yen by March 2006 helped the dollar higher.
So did comments by Federal Reserve chairman Alan Greenspan to a Congressional committee on Thursday. He gave a fairly optimistic assessment of the US economy, including his belief that the US economy is on “a reasonably firm footing” and that inflation is at an acceptable level.
Greenspan ups a quarter percentile
February 3, 2005
Alan Greenspan finally allowed the markets to exhale, as the Federal Reserve finally upped interest rates again, by a 0.25%.
The move had been long expected, and as reports came in over December and Jabuary suggesting strong economic growth, the move was inevitable.