Dollar Firm, but Traders Await ECB Rate Decision
Jul 1st, 2008 | By Doug Casey | Category: US Dollar & Forex TradingIn the currency market, the dollar edged higher against the euro. Late Monday, the euro was trading at $1.5775 vs. $1.5789 on Friday.
“End of quarter profit-taking has helped the U.S. dollar recover the majority of its earlier losses,” said Kathy Lien, chief strategist at DailyFX.com.
Lien added that, “It is going to be a very active week for the currency market … The ECB interest rate decision and the non-farm payrolls report collide to create the perfect storm for the U.S. dollar.”
Expectations that the ECB will in fact raise rates were stoked by a European Union statistics office report yesterday showing that consumer inflation across the 15-nation euro zone rose at an estimated annual pace of 4% in June, up from 3.7% in May. That exceeded economists’ projections of a 3.9% rise.
The immediate effect of an ECB rate hike, to combat inflation that is now well out of its comfort zone, is of course negative for the dollar, but what about longer term? Some see a silver lining.
“A euro close to $1.60 and higher rates are going to kill euro-zone growth,” said Win Thin, a currency strategist at Brown Brothers Harriman & Co. in New York. “Short-term the dollar is vulnerable, but long-term I like it.”
Source: Dollar Firm, but Traders Await ECB Rate Decision
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