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Dollar in demand

Monday, August 25 09:37:32

The dollar marched higher against the euro and yen on Monday as investors wagered that interest rates were set on a diverging course in the United States, Europe and Japan, giving a lift to Tokyo stocks in the process.

Pledges of policy stimulus from the heads of the European Central Bank and the Bank of Japan pressured both the euro and the yen, leaving the U.S. dollar as the winner by default.

The common currency skidded as far as $1.3185, from around $1.3246 late in New York on Friday, while the dollar was up at 104.20 yen and near a seven-month peak.

The euro also lost ground against many other currencies, notably hitting a near 10-month low on the Australian dollar at A$1.4163.

The yen's fall was taken as positive for Japanese exports and corporate earnings and helped the Topix up 0.4 percent and the Nikkei 0.48 percent. Moves elsewhere were muted and MSCI's broadest index of Asia-Pacific shares outside Japan was near flat.

In Europe, financial spreadbetters expected opening gains of 0.5 percent to 0.6 percent for the DAX and CAC 40 , while the London market was on holiday.

The S&P 500 EMini futures contract was trading almost 0.4 percent firmer.

The action in currencies came after ECB President Mario Draghi said the bank was prepared to respond with all its "available" tools should inflation drop further.

Data due out on Friday are expected to show annual inflation slowed to just 0.3 percent in August from 0.4 percent in July, further distant from the ECB's target of nearer 2 percent.

In stronger language than usual, Draghi emphasised that inflation expectations were showing significant declines and noted a lower euro could help lift exports and inflation.

Wall Street was quiet in comparison with the Dow ending Friday down 0.22 percent, while the S&P 500 lost 0.2 percent and the Nasdaq edged up 0.14 percent.

In commodities, the rising dollar pressured prices with spot gold slipping to $1,278.00 an ounce, not far from last week's trough of $1,273.96.

Oil remained under pressure from plentiful supplies and October Brent crude eased 20 cents to $102.09 a barrel. U.S. crude lost 13 cents to $93.52 a barrel. (Reuters)

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