LONDON, 5 April 2005 — The dollar firmed yesterday as US investors returned from the weekend, armed with further evidence that the US Federal Reserve will continue raising borrowing costs over the year, in contrast to the euro zone and Japan. The euro fell to 1.2838 dollars from 1.2905 late on Friday in New York. The dollar firmed to 108.28 yen from 107.56 on Friday.

In particular, the market latched onto weekend comments from St. Louis Federal Reserve President William Poole. Poole, who is a non-voting member of the rate-setting Federal Open Market Committee (FOMC) this year, told a conference at Princeton University that the market was right to interpret the Fed’s “increased concern” over inflation as a sign of additional rate increases, adding that the risks to inflation over the next six months were on the upside. “Poole’s comment is a strong reminder of the change in the Fed’s interest rate stance and that is a positive for the dollar,” said Neil Mackinnon, chief economist at ECU Group.

Meanwhile, leading European stock markets closed lower yesterday as oil prices hit new highs. The London FTSE 100 index slid 0.35 percent to 4,896.70, the Frankfurt DAX 30 dropped 0.73 percent to 4,341.39 and the Paris CAC 40 fell 0.68 percent to 4,052.32. The DJ Euro Stoxx 50 index of leading euro zone shares dipped 0.62 percent to 3,042.17.

Elsewhere in Europe, the Swiss SMI index shed 0.80 percent at 5,903.17. The Amsterdam AEX dropped 0.35 percent to 366.91, the Brussels Bel-20 fell 0.34 percent to 3,129.52, the Madrid Ibex-35 gave back 0.90 percent at 9,206.0 and the Milan SP Mib dipped 0.39 percent to 32,355.0.

In New York, US stocks came under renewed pressure yesterday.

The Dow Jones Industrial Average fell 21.14 points (0.20 percent) to 10,383.16 and the NASDAQ composite dropped 7.80 points (0.39 percent) to 1,977.01 at 1545 GMT. The broad-market Standard and Poor’s 500 index drifted down 2.27 points (0.19 percent) to 1,170.65.

Asian share prices were mostly lower yesterday. The Tokyo Stock Exchange’s benchmark Nikkei-225 index fell 56.09 points to 11,667.54.

In Hong Kong, the Hang Seng Index closed up 22.06 points or 0.16 percent at 13,513.41, off a low of 13,436.96 and high of 13,545.31. In Seoul, the KOSPI index closed up 0.6 points at 982.50.

The Bombay Stock Exchange’s 30-share Sensex slipped 0.62 points or 0.01 percent to close at 6,604.42.