Inflation growth sends USD higher

February 20, 2008

Inflation growth sends USD higher

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Inflation growth sends USD higher




The US dollar strengthened versus the euro, the yen, and most major currencies as inflation grew more than expected in January.

The Consumer Price Index was at 4.3 percent in January, up from 4.1 percent in December, while the core CPI excluding food and energy prices rose from 2.4 percent in December to 2.5 percent in January.

At just before noon in New York the dollar traded at $1.4666 to the euro, at $1.9404 to the pound, while it cost ¥107.9900 to buy a dollar.

Gains versus the euro could be limited, however, on news that the biggest labor union in Germany has negotiated a 5.2 percent pay raise for 85,000 steelworkers, which has reduced sentiment that the European Central Bank will cut interest rates soon.

The pound was lower after release of the minutes from the most recent meeting of the Bank of England’s monetary policy committee, which showed that the vote to cut interest rates was 8 to 1, with the lone dissenter favoring a larger rate cut than was decided on.

In midday trade in New York, the pound traded at 75.58p to the euro while it cost ¥209.5489 to buy a pound.

The South African rand declined versus all major currencies after the finance minister there said that institutional investors will be allowed to invest more money abroad.

The rand traded at $7.8975 to the US dollar, at R11.582 to the euro, and at R15.326 to the pound.

Meanwhile, the yen gained on both the rand and the Norwegian krone as declines in equities markets spurred investors to pull out of carry trades.

The yen traded at ¥13.682 to the rand and at ¥20.096 to the krone.



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