LONDON, 21 October 2005 — The dollar came under pressure from the euro here yesterday but held firm on prospects for higher US interest rates. The single European currency in late-day trade was at 1.1985 dollars, against 1.1992 late Wednesday in New York. The euro nonetheless made up substantial ground after plunging to 1.1876 dollars on Wednesday. The dollar was meanwhile trading at 115.44 yen after 115.37 on Wednesday.
The US central bank, the Federal Reserve, is expected to lift rates at each of the two more meetings left this year, taking the benchmark rate to 4.25 percent from 3.75 percent at present. But it will take further strength in key indicators for the market to price in additional hikes in 2006 and to give the dollar more support, analysts said.
The euro was changing hands at 1.1985 dollars against 1.1992 late on Wednesday in New York, 138.39 yen (138.35), 0.6767 pounds (0.6792) and 1.5476 Swiss francs (1.5526). The dollar stood at 115.44 yen (115.37) and 1.2917 Swiss francs (1.2946). The pound was being traded at 1.7712 dollars (1.7651), 204.48 yen (203.65) and 2.2871 Swiss francs (2.2855).
Asian stocks closed mixed yesterday in volatile trade marked by unexpected gains on Wall Street overnight which came on the heels of reassuring Federal Reserve comments on the US economy. However, dealers said a bounce in some regional markets was purely technical given the steep falls suffered on Wednesday and investors remained anxious over the prospect of inflation fuelling further interest rate hikes in the US.
This would dampen global economic growth and force central banks in the Asia-Pacific region to follow suit, and raise the costs of borrowing. Seoul, Taipei and Tokyo, which had suffered miserably earlier in the week, were among the biggest gainers while Jakarta and Shanghai were flat.
Meanwhile, world oil prices plunged yesterday to three-month lows on relief that Hurricane Wilma was forecast to miss battered energy infrastructures in the US Gulf of Mexico, dealers said in London. Traders were also absorbing news of a surprise rise in US crude and gasoline reserves from the previous day.
New York’s main contract, light sweet crude for delivery in November, plunged 2.01 dollars to 60.40 dollars per barrel in pit trading on Thursday, after earlier hitting 59.85 dollars for the first time since July 28. In London, the price of Brent North Sea crude for December delivery plummeted 1.13 dollars to 57.47 dollars per barrel in electronic deals, after earlier touching $57.12 — its lowest level since July 25.