Forex - US dollar firms in Tokyo as no further ECB rate hikes seen
*Dollar looking firmer, and getting ready to potentially breakout, which inevitably may create the mother of all bull-traps in the world's reserve currency???...
Forex - US dollar firms in Tokyo as no further ECB rate hikes seen 12.01.2005, 11:35 PM
TOKYO (AFX) - The US dollar firmed against other leading currencies in early afternoon trade as dollar bulls took comfort from comments from the head of the European Central Bank who played down prospects for future rate hikes following a 25 basis points hike overnight, dealers said.
The hike was the first increase in ECB key rates in a little over 5 years but the increase was factored in well ahead of time with the market focusing more on indications over the bank's future policy tack.
ECB President Jean-Claude Trichet provided comfort to dollar bulls when he indicated the modest overnight spike would not be the starting point for a series of rate increases.
'Given only limited improvement in European economic fundamentals, the ECB does not have a great deal of room for further rate hikes,' Sumitomo Mitsui Banking Corp strategist Daisuke Uno said.
With many European economies growing at anaemic rates, commentators believe the central bank would be very relucant to take any policy action that might stifle growth.
At 12.45 pm Tokyo (0345 GMT) the euro was quoted at 1.1725 usd, compared to 1.1735 in early Sydney trade and 1.1730 in New York late yesterday. The US unit was at 120.52 yen here from 120.47 in Sydney and 120.45 in New York.
With the ECB's move out of the way, traders said the market will now shift its attention back to economic developments in the US, including the upcoming FOMC meeting on Dec 13.
'As we are not expecting any fresh trading leads from Europe for now, the market will turn its focus back to the US side,' Uno said.
Dealers said the dollar/yen was moving in a relatively narrow range today with investors now awaiting tonight's release of November US non-farm payroll data for a fresh cue.
The market is expecting an increase of around 225,000 in the payroll for November.
While investors will be a little cautious ahead of the data the continued wide rates differential between the US and Japanese central banks is likely to keep the yen under pressure for the foreseeable future, especially with doubt emerging over a near term end to the Bank of Japan's super-loose monetary policy.
'The emerging view is that due to strong pressure from politicians, the Bank of Japan may face serious difficulties in lifting its super-loose monetary policy, and this is accelerating the pace of decline of the yen,' Mizuho Securities chief market economist Yasunari Ueno said.
Tokyo 12.45 pm (0345 GMT) Sydney 11.28 am (0028 GMT)
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