The Empire 380

"US dollar drops as Fed rate rise seen delayed
June 21, 2008

The US dollar posted its biggest weekly decrease against the euro in almost three months on speculation the Federal Reserve will delay increasing borrowing costs to prevent further credit market writedowns.

The greenback fell this week versus all of the other major currencies as Lehman Brothers Holdings said losses at Fannie Mae and Freddie Mac, the two largest US mortgage finance companies, may mount. The euro posted a sixth weekly advance against the yen, the longest gain in more than a year, as German producer price inflation accelerated.

''The re-emergence of financial concern places a question mark on the Fed's ability to raise interest rates,'' said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets, a unit of Canada's biggest bank by assets. ''The possibility of a revisit to $US1.60 is still in the cards.''

The Australian and New Zealand dollars posted weekly increases on speculation the countries will maintain their yield advantages over the US. The target lending rates of 7.25% in Australia and 8.25% in New Zealand compare with the 2% fed funds target.

The Aussie dollar was up 0.3% to 95.41 US cents in late Friday trading, pushing its weekly gain to 1.6%, the biggest in almost three months. The kiwi, as the New Zealand dollar is known, traded at 76.20 US cents and also rose 1.6% this week.

Against the euro, the US dollar dropped 0.7% to $US1.5618 at 4:20 p.m. in New York, from $US1.5504 yesterday. It touched $US1.6019 on April 22, the weakest level since the 15-nation euro debuted in 1999. The dollar fell 0.7% to 107.26 yen, from 108. The euro traded at 167.55 yen, compared with 167.43.

The US currency fell 1.6% against the euro this week, its biggest drop since March 28. The dollar rose 2.5% last week, the most since 2005, and touched a one-month high of $US1.5303 per euro after Fed Chairman Ben S. Bernanke said economic risk had faded."

Lees verder: http://business.watoday.com.au/us-dollar-drops-as-fed-rate-rise-seen-delayed-20080621-2udh.html