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CURRENCIES: Dollar Falls Vs. Euro After ECB Rate Announcement, U.S. Data
Cat : Euro/ Dollar
Date : 2006-08-31 20:05:16                      Reader : 622
US is suffering from annual deficit of nearly half trillion dollar, in addition to foreign debt deficit of more than nine trillion dollars. US is spending billions in Iraq war from tax payers against American nation will. One day world economy might collapse as happened in the thirties. So all should take precaution .
31/8/2006
CURRENCIES: Dollar Falls Vs. Euro After ECB Rate Announcement, U.S. Data
 By Wanfeng Zhou
The dollar fell versus the euro and traded little changed against the yen early Thursday on growing expectations that interest rates in the eurozone will continue to climb higher.
The European Central Bank on Thursday kept interest rates on hold at 3%, after hiking by a quarter-point earlier this month. ECB President Jean-Claude Trichet said in prepared comments that "strong vigilance" is needed toward inflation risks and that monetary policy is "accommodative." He said a further withdrawal of accommodation would be warranted if its economic projections are confirmed.
Comments from Trichet have been "very hawkish," said Kathy Lien, chief strategist at FXCM. "As a central bank that never likes to surprise, the ECB is telling us that they feel that growth will continue to rise and it remains essential for them to contain inflation."
"This leaves a September rate hike very much on the table," Lien said, adding that she expects the euro to target 1.2950.
In early New York trading, the euro was quoted at $1.2869, compared with $1.2831 late Wednesday. The dollar changed hands at 117.02 yen, compared with 117.11 yen.
The British pound traded at $1.9075 compared with $1.9043. The dollar was last at 1.2240 Swiss francs, compared with 1.2276 francs.
The euro fetched 150.65 yen, compared with 150.31 yen, after touching an all-time high of 150.75.
U.S. data offer no surprises
The Commerce Department said core consumer prices, as measured by the personal consumption expenditure price index excluding food and energy, rose 0.1% in July, the smallest gain since December. Economists were expecting a 0.2% gain.
In the past year, core prices are up 2.4%, matching the biggest gain in 11 years and well above the Federal Reserve's implied comfort zone of 1% to 2% for core inflation.
Meanwhile, initial claims for state unemployment benefits fell by 2,000 to 316,000 for the latest week.
The inflation figure "fits the Fed's scenario nicely, suggesting that inflationary pressures are beginning to moderate," said Brian Dolan, director of research at Forex.com.
This morning's economic reports showed "there's still no real justification for the Fed to consider tightening its monetary policy for the time being," added Andy Cottrill, a foreign-exchange trader at CMC Markets.
Bernanke speech awaited
Meanwhile, Federal Reserve Chairman Ben Bernanke is scheduled to speak on productivity at lunch time.
In addition, the Chicago manufacturing and factory orders reports are both due at 10 a.m.
The MarketWatch forecast, based on a survey of economists, is for the Chicago purchasing managers index to show a headline reading of 57.0% for this month, which would mark a decline from 57.9% in July.
MarketWatch also projects that factory orders fell 0.9% in July, which would mark a reversal from the 1.2% gain seen in June.
Elsewhere, the Eurostat statistics agency said inflation in the euro zone was 2.3% in August, above the bank's target of 2%, though below July's reading of 2.4%. Money growth also has been running ahead of the central bank's target.
The European Commission's euro zone economic indicator fell more than forecast, to 106.7 from an upwardly revised 107.8 in July. The E.C. poll decline was on weaker industrial confidence, though consumer confidence was unchanged.
Yen remains weak
The Japanese currency weakened to a new record low against the euro Thursday, with the latest bout of selling precipitated by a surprisingly weak industrial production report.
Japanese industrial production dipped 0.9% in July, against expectations of a 0.8% rise, reinforcing the market's view that the Bank of Japan may refrain from raising interest rates further this year.
The yen has taken a beating lately after a soft Japanese consumer inflation report damped the prospects of another rate rise this year in the world's second-largest economy.
Japanese Finance Minister Sadakazu Tanigaki said earlier this week that the government will be closely watching currency movements in the wake of the euro's sharp rise against the yen.

 
 
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