Tuesday, October 11, 2005


Rate Hikes To Continue: Fed Minutes

The minutes from the latest Fed meeting have been released. "The dollar remained higher against the euro and yen after the Federal Reserve released minutes of last month's meeting indicating policy makers are likely to keep raising interest rates to stem inflation. Higher rates boost the dollar by making U.S. debt securities more attractive to foreign investors."

"'The reason the dollar is staying strong is because markets have continued to price in more Fed tightening,' said Daniel Katzive, a currency strategist at UBS AG. Fed policy makers already have raised the benchmark from 1 percent to 3.75 percent since June 2004."

"Gains for the Japanese currency were limited because investors believe the Bank of Japan will refrain from ending its policy of pumping money into the economy until next year, said Steven Saywell, chief currency strategist at Citigroup Inc.."

"The central bank has added money to the economy and kept interest rates near zero for 4 1/2 years to fight deflation. Minoru Masubuchi, a former executive director of the bank said in an interview on Oct. 7 that it's 'still a bit too early' to predict when policy makers will alter their stance. 'We fully take on the recovery that's been happening in Japan but we've still got very easy monetary policy,' said Saywell. 'When we see the end of that easy money policy, the yen will begin to appreciate.'"

"The euro was quoted at $1.199, down from $1.2052 late Monday. Later, in midday trading in New York, the euro fetched $1.2010. Other dollar rates included 114.34 Japanese yen, up from 114.20; 1.2911 Swiss francs, up from 1.2845; and 1.1778 Canadian dollars, up from 1.1766. The British pound was quoted at $1.7455, down from $1.7537."

"In midday New York trading, the dollar bought 114.22 yen and 1.2881 Swiss francs, while the pound was worth $1.7485. Gold closed in London at $476.05 bid per troy ounce, up from $473.60 on Monday. In Zurich the bid price was $475.75, up from $472.20. Silver closed in London at $7.85 bid per troy ounce, up from $7.76."

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