Wednesday, November 16, 2005


Rate Hike Expectations Support US$

Reuters reports on support for the US dollar. "The dollar rallied close to a 27-month high against the yen and two-year peaks against the Swiss franc, sterling and the euro on Wednesday after Treasury data showed record net inflows into U.S. assets in September."

"The dollar had already gained in reaction to a report showing U.S. consumer inflation was higher than expected. Consumer prices rose 0.2 percent in October despite a dip in energy prices as housing costs notched the largest increase in nearly five years."

"'The core print was pretty much as expected, while the headline is just a touch firmer than expectations,' said Ronald Simpso. 'It keeps the Fed expectations on track for a hike at their next meeting and the meeting after that.'"

"The Federal Reserve has been tightening credit since June 2004 to ward off inflation, raising short-term interest rates in quarter-percentage-point increments from a four-decade low of 1 percent to the current 4 percent. Further increases are widely expected at policy meetings in December and January."

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