American focus: USD falls before FOMC meeting [E]

The dollar fell for the first day in three against the euro and yen on speculations USD growth will stop ahead FOMC meeting. Today’s decrease reduced monthly USD gains to 1.9% against the euro and 3.3% versus the yen. The dollar got support due to strong inflationary data, which strengthened Fed rate expectations. Some observers predict interest rate increase in August after awaited hike to 5.25% (Federal Funds 25 years диаграмма Federal Funds 50 years диаграмма) in June.

EUR gains accelerated on Monday after an announcement that the United Arab Emirates central bank decided to raise euro reserves by 10% (or $23 bln.) Last year worldwide central banks reduced USD reserves to 68% from 72% in 1999. Euro may continue restoration in a view of planned economic reports which may show inflation and business confidence held near a 15-year high. If forecasts will be justified, the probability of further interest rates rise in Eurozone will increase.

Wall Street trades uncertainly before FOMC meeting. Nevertheless, market opened on positive note after M&A news. Johnson & Johnson reported $16.6 bln. deal on purchase of Pfizer’s unit, which includes such famous brands as Listerine, Rolaids, Rogaine and Sudafed. Phelps Dodge agreed to buy two main Canadian nickel mines of Inco and Falconbridge for $40 bln. Besides in the Europe Arcelor received the $32.2 bln. offer from Mittal Steel.