Sun, Feb 20, 2005 - Page 10 News List

Greenback caught in range-bound trading

AFP , LONDON

The US dollar drifted in range-bound trading late Friday after a short-lived move higher following a spike in US producer price figures.

The euro traded for US$1.3068, compared with US$1.3069 late on Thursday in New York.

The dollar stood at ?105.81, up from ?105.51 on Thursday. In earlier trades, the euro changed hands for around US$1.3020 after the US Labor Department said its producer price index had jumped 0.3 percent in January from December, while the core rate, which excludes volatile food and energy costs, soared 0.8 percent. The latter PPI figure was about four times higher than what had been expected.

But the buying that lifted the dollar soon faded and fresh selling emerged from "some sovereigns" to push the dollar lower again, said Mike Berg at 4CAST in a reference to unnamed central banks.

Meanwhile, a slightly weaker than forecast University of Michigan consumer sentiment survey also helped hold the dollar down.

Some analysts pointed to falls on the US bond market to explain the dollar's inability to gain ground despite renewed expectations of higher US interest rates.

They noted that falling bond prices makes holding dollar-denominated assets less attractive -- a factor that would incite some investors to sell dollars.

Michael Moran at Daiwa Securities warned that the steep rise in core PPI prices "may stir thoughts of a 50-basis-point change in the Fed funds rate."

If later backed up by rises in the consumer price index measure of inflation, "a more aggressive tack from the Fed is quite possible," he added.

Elsewhere, the pound was steady after British government finances improved to their best level since January 2000, allaying some concerns that taxes would have to rise after the next general election.

The public finances data offset the negative impact of falls in mortgage lending levels in numbers released at the same time.

Official figures showed a public sector net cash requirement figure reaching a surplus of ?16.86 billion (US$31.9 billion), the biggest in five years.

The yen, meanwhile, came under pressure from fresh rises in oil prices, given Japan's status as a net oil importer.

The Australian dollar came back slightly after having been depressed by comments from Reserve Bank of Australia governor Ian Macfarlane that economic activity in the country is expected to slow.

The euro was changing hands at US$1.3068 against US$1.3069 late on Thursday in New York, ?138.23 (?137.88), ?0.6895 (?0.6891) and 1.5461 Swiss francs (SF1.5471).

The US dollar stood at ?105.81 (?105.51) and SF1.1833 (SF1.1838).

The pound was at US$1.8948 (US$1.8953), ?200.49 (?199.95) and SF2.2422 (SF2.2440).

On the London Bullion Market, the price of an ounce of gold stood at US$427.10 against US$426.25 late on Thursday.

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