American focus: speculations on interest rates continue to support USD [E]

On Thursday the dollar continued to rise against the main currencies after Federal Reserve representatives expressed their worries about inflation in the country, that may prompt further rates increase in the country. Investors focused on dollar after the expectations of rates increase in main world economies led to stock markets fall. The U.S. currency also strengthened versus the euro on a background of weakening speculations that rate differential between Europe and USA will be reduced this month. FED governor Donald Kohn will speak today after its colleagues, including Ben Bernanke, hinted on further rates increases earlier this week. At the moment futures priced in 82% probability of key rate hike to 5.25%, that is up 38% in May. «The probability of inflation growth today is stronger, than probability of US economy slowdown», said Guynn. «Growth of price pressure is undesirable», told Bernanke on June 5.

ECB lifted rate to 2.75% today, as expected. That was the third rise since December last year. However press-conference of ECB Chairman Jean-Claude Trichet became most important. There he said today’s increase became the reflection of market expectations. He also noted, that inflation control is necessary for stimulation of economic growth. As he said rates in the region remain on a low level, however policy of the Central Bank still "accommodative". Today the decision about rates also was accepted by Bank of England МРС. Key rate remained at 4.5%, as broadly expected. Rates were raised in South Korea and Turkey for the last 24 hours.

Announcement of Iraq government about the killing of terrorist group leader al-Qaeda Abu Musab al-Zarqawi was a catalyst for dollar rise in the first half of the day. Besides, the Central Bank of Russia today said, that 50% of gold-currency reserves of the country are kept in dollars, 40% - in euros and 10% - in yen and sterling. Yen sales were as Japan stock market leapt to year low, reducing the possibility of interest rates increase by Bank of Japan in July. Nikkei 225 lost 3.1% to below 15,000, that happened for the first time since November 30. Analysts in Barclays predict, that the Central Bank will raise base rate in September.

Shares on Wall Street continue to remain under pressure in a view of interest rate concerns. Oil prices fell after the report about death of al-Zarqawi, the leader of terrorist group in Iraq.