Thu, Apr 10 2008, 12:40 GMT
http://www.afxnews.com
LONDON (Thomson Financial) - The euro stayed within spitting distance of record highs against the dollar and pound as the European Central Bank lived up to expectations by keeping its base rate unchanged yet again.
Attention now turns to the post rate verdict news conference where ECB chief Jean-Claude Trichet's every word will be scrutinised for any change in the central bank's so far hawkish rhetoric.
Today's much awaited ECB rate verdict brought no surprises with the base rate left unchanged at 4.00 percent and Jennifer McKeown at Capital Economics believes Trichet will continue to sound tough on inflation.
"With inflation hitting a new series-high of 3.5 percent in March and inflation expectations still at high levels, we doubt that the Bank will be ready to signal rate cuts just yet," she said.
Against this backdrop, it is hard to see the euro losing steam. It earlier set a record 1.5912 aginst the dollar.
Also today, the Bank of England reduced its base rate for the third time in five months despite ongoing concerns about rising inflationary pressures -- a factor which weighed on the pound.
The rate cut decision was widely expected and had earlier led the pound to a record low of 0.8028 stg against the euro. Against the dollar though the pound was a touch higher.
Following the rate decisions, the market will also move to focus on this weekend's G7 meeting of finance ministers and central bankers, which takes place in the wake of the IMF's sharp global growth downgrades.
"Speculation remains that some kind of sabre rattling will be seen amongst central bankers who are somewhat disgruntled with the weak dollar and volatile market conditions, so even once today's verdicts are clear there's going to be no let-up in the posturing," said James Hughes, analyst at CMC Markets.
The yuan, meanwhile, rose against the U.S. dollar on views the Chinese government will allow the nation's currency to appreciate to ease inflationary pressures. A strong yuan will lower the costs of imported goods such as oil.
The nation's central bank, the People's Bank of China, freed the yuan from its peg to the dollar in favour of a trade-weighted basket of currencies in July 2005. The bank allows a trading band of 0.5 pct on either side of the central parity rate.
Since July 2005, the yuan has risen 15.5 percent versus the dollar.
China's inflation rate is currently at the highest in nearly 12 years.
London 1.14 pm London 8.28 am
U.S. dollar
yen 100.27 down from 100.97
Swiss franc 0.9910 down from 0.9982
Euro
U.S. dollar 1.5875 up from 1.5844
yen 159.20 down from 160.05
Swiss franc 1.5739 down from 1.5811
pound 0.8011 up from 0.8010
Pound
U.S. dollar 1.9813 up from 1.9770
yen 198.68 down from 199.75
Swiss franc 1.9640 down from 1.9739
Australian dollar
U.S dollar 0.9326 up from 0.9321
pound 0.4705 down from 0.4713
yen 93.47 down from 94.17
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