2 August 2006, 16:39  Euro eases from highs

The euro trimmed gains after hitting a near one-month high versus the dollar on Wednesday, with investors looking to an expected euro zone rate rise later this week but less certain on the outlook for U.S. rates. Currency markets brushed off euro zone producer prices data and steadied themselves ahead of the ADP National Employment Report, due at 1215 GMT, as well as Thursday's European Central Bank meeting and Friday's U.S. payrolls numbers. "The underlying dollar aversion due to the assumption that the Fed may be done raising rates is obviously driving markets," said Armin Mekelburg, currency analyst at HVB in Munich. "I expect that Trichet tomorrow will keep his hawkish stance and will repeat the 'v-word', 'vigilance', so euro/dollar could get another push stronger towards the technical resistance around $1.2865," he added. Against a basket of currencies, the dollar fell to its lowest level since July 7, at 84.91, but recovered slightly by 1140 GMT to 85.11. It was up 0.2 percent at $1.2799 per euro , having hit a one-month low of $1.2835 earlier, while it was steady at 114.64 yen . Against the yen, the euro lost around 0.1 percent to trade at 146.76 yen. Data on Tuesday showing robust U.S. manufacturing growth and a rise in the U.S. Federal Reserve's favoured inflation gauge to a four-year high failed to dispel mounting expectations that the Fed will hold rates steady at 5.25 percent on Aug. 8

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