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Dollar touches six-month high

Wednesday, July 30 08:45:15

The dollar touched a six-month high against a basket of major currencies on Wednesday, holding firm ahead of a Federal Reserve policy decision and U.S. gross domestic product data due later in the day.

Dollar bulls are holding out hope that the U.S. economy has rebounded in the second quarter from a very soft patch and that the Fed will provide some hints on when it will raise interest rates.

Against a basket of major currencies, the dollar touched a high of 81.251 as of 0626 GMT, its strongest level in about six months.

The euro remained wobbly and slipped to a fresh eight-month low around $1.3403 on trading platform EBS, moving just a tad below the previous day's trough. The euro last stood at $1.3405, little changed on the day.

Worries about geopolitical tensions in Ukraine and concerns that sanctions against Russia could have a negative economic impact on Europe have helped weigh on the euro recently, said Bart Wakabayashi, head of foreign exchange for State Street Global markets in Tokyo.

A survey released late last week had shown that German business sentiment fell to its lowest level in nine months in July, adding to signs that Europe's largest economy is slowing and suggesting that firms are worried about the crises in Ukraine, Iraq and Gaza.

On Tuesday, the European Union and the United States announced further sanctions against Russia, targeting its energy, banking and defence sectors in the strongest international action yet over Moscow's support for rebels in eastern Ukraine.

Moves among major currencies were subdued ahead of the Fed policy decision and U.S. GDP data. Against the yen, the dollar touched a fresh three-week high of 102.165 yen on EBS, and was last steady on the day at 102.15 yen.

Analysts polled by Reuters expect the U.S. economy to have grown at an annualised rate of 3.0 percent in the second quarter, turning around from a 2.9 percent contraction in the first three months of the year due in part to a harsh winter.

Traders said anything less than 3 percent will be taken as a negative and could send dollar bulls packing.

The Fed, meanwhile, is all but certain to cut its monthly bond-buying programme by another $10 billion, but the focus has already shifted to when it will start to lift interest rates. This week's meeting, however, will conclude with only a statement and none of the theatre associated with a news conference, leaving markets to go through every sentence with a fine-tooth comb for subtle changes. (Reuters)

For more visit: www.businessworld.ie