Wednesday, 18 May 2011

Dollar Strengthened Vs. Euro on Speculation U.S. Might Hike Rates

The U.S. dollar appreciated against most of its major currency counterparts on Wednesday trading session on speculation that American inflation might result in an interest rate hike in the next few months, sooner than expected.

U.S. Federal Reserve policymakers have discussed future monetary policy at their April meeting minutes. Due to the rising inflation, some fed policymakers have suggested to tighten monetary policy sooner than anticipated by analysts.

As a result, the greenback gained about 80 pips against the 17-nation currency, and the EUR/USD pair saw a daily low of 1.4195. In addition, the dollar gained about 140 pips against the British pound as the GBP/USD pair bottomed at the 1.6105 level.

Looking ahead to tomorrow, several significant economic releases are expected from the U.S., including the weekly Unemployment Claims, the Existing Home sales and the Philadelphian Fed Manufacturing Index.

If the end results of these reports will provide positive signals, the dollar might extend today's rally against its major currency rivals.