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| Dollar slips to month low against euro |
| 2004-05-06 |
| The dollar lost ground on Wednesday, chalking up a four-week low against the euro after the Federal Open Market Committee said it could afford to be "measured" in raising interest rates from 46-year lows. As widely expected, the committee said the upside and downside risks to sustainable growth were now "roughly equal" and the risks to price stability have "moved into balance". The well-worn phrase that the FOMC could be "patient" in removing its policy accommodation also disappeared, but the replacement - "that policy accommodation can be removed at a pace that is likely to be measured" - created as many questions as it answered. Most took the statement to mean that US rates will not rise in June. With no meeting planned for July, August would thus be the first opportunity for an increase. "The FOMC has set itself up to where its earliest hike can’t come until August 10 because the statement is insufficient to prep the market for a June 30 rate hike," said Aziz McMahon, currency strategist at ABN Amro. However with the doves holding sway, the dollar extended Tuesday’s sell-off, losing Y1 against the yen to Y108.65 and slipping to a four-week low against the euro of $1.2179. The euro was generally strong, recording a seven-week high of £0.6789 against sterling, aided by a modest uptick in the health of the eurozone service sector. |
| Posted by:Mark Espinola |