3 May 2005, 10:57  The dollar gained ground against major currencies

The dollar gained ground against major currencies on Tuesday as traders bet the U.S. Federal Reserve will keep steadily raising interest rates to fight inflation despite evidence of a weakening U.S. economy. The dollar advanced to 105.22 yen by 0542 GMT, a fifth-of-a-percent stronger than late trading in New York on Monday and it gained a quarter of a percent to $1.2834 against the euro. Weak U.S. economic data, starting with slower-than-expected first-quarter gross domestic product growth last week, had raised some concerns the Fed may slowdown the pace of rate rises in its year-old battle against inflation. But analysts said the U.S. Federal Open Market Committee was almost certain to deliver an eighth consecutive rise in its fed funds rate later on Tuesday and continue with a tightening pace as inflationary pressures remained its primary target. The Fed is likely to announce a rate decision at about 1815 GMT. Higher U.S. rates would make short-dated U.S. assets more attractive to foreign investors. "The (Fed's) words will matter more than action and lend some support to the dollar," said Claudio Piron, currency strategist at JPMorgan Chase Bank in Singapore. "We're cognisant that U.S. growth has hit a soft spot but we think that it's a temporary phenomenon." Piron expects U.S. non-farm payrolls data due later this week to exceed the market's expectations. That, compared with weak economic data from Europe, could hurt the euro against both the dollar and the yen, Piron said.

© 1999-2024 Forex EuroClub
All rights reserved