Forex - US dollar weaker in Sydney afternoon on FOMC outlook concerns |
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Tue, 08 May 2007 05:56
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SYDNEY (XFN-ASIA) - The US dollar was lower against the yen and euro here with traders becoming increasingly worried that the Federal Reserve will downgrade its inflation outlook at a meeting tomorrow, weighing on yield support for the US currency, dealers said.They said with few key data releases tonight, trading is expected to hinge on forecasts for the US central bank's outlook as well as Thursday's meeting of the Bank of England and European Central Bank.At 2:27 pm Sydney (0427 GMT), the dollar was at 119.78 yen from 120.08 in Sydney morning trade while the euro was at 1.3615 usd, from 1.3598 earlier.CMC Markets chief analyst Ashraf Laidi said his firm expects the FOMC statement to be negative for the US dollar given the central bank is likely to mention the recent softening in inflation.Additionally, Laidi said while the Fed is unlikely to change their growth assessment, the central bank is also expected to continue in not referring to the labor market, preferring not to trigger additional market volatility considering the recent weakening in employment conditions.'With the recent US data showing lower inflationary pressures, weaker employment growth and continued slowing in GDP growth, the Fed's continued focus on inflation vigilance will be challenged by the markets,' he said.'While we have not abandoned our calls for a June rate cut, we expect a 75 pct chance for a third quarter interest rate cut to start as early as August,' Laidi added.The FOMC statement and the resulting sell-off in bond yields will be in stark contrast to Thursday's BoE meeting given the widely expected 25 basis point interest rate hike to 5.50 pct. The ECB is expected to open the door for a June rate hike to 4.00 pct.'Now that market-friendly candidate Nicolas Sarkozy has won Sunday's French presidential election by a convincing margin, we expect the euro to regain its upward momentum towards the 1.3630 usd target, followed by 1.3650 usd,' Laidi said.'We expect the dollar part of the US dollar/yen currency pair to resurface as expectations of a Fed easing draw near,' he added.Sydney 2:27 pm (0427 GMT) vs Sydney 11:00 am (0100 GMT)US dollaryen 119.78 vs 120.08sfr 1.2113 vs 1.2130Eurousd 1.3615 vs 1.3598yen 163.06 vs 163.27sfr 1.6490 vs 1.6490stg 0.6821 vs 0.6824Sterlingusd 1.9961 vs 1.9928yen 239.04 vs 239.26sfr 2.4176 vs 2.4165Australian dollarusd 0.8306 vs 0.8254stg 0.4161 vs 0.4142yen 99.480 vs 99.090New Zealand dollarusd 0.7396 vs 0.7374paul.daniel@xfn.com
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Forex - Dollar gains ground in Singapore afternoon trade as FOMC result awaited 