Tuesday, November 01, 2005


Fed Hike To Boost US Dollar

The Financial Times has the latest on the currency front. "The dollar hit a fresh two-year high against the yen at Y116.75 ahead of an expected quarter point interest rate rise by the US Federal Reserve later on Tuesday. The Fed is seen raising interest rates for a 12th consecutive month to 4 per cent. Economists are now seeing the rate cycle peak at 4.5 per cent or even 5 per cent next year following the recent flood of hawkish comments from Fed officials on containing inflation."

"The yen has suffered from Japanese investors’ easing risk aversion. Signs of sustained economic recovery has meant more confident investors are buying foreign assets. The Bank of Japan may be moving toward dumping its ultra easy monetary policy but no move away from near zero interest rates is expected for some months. This means the yield remains much better overseas."

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