European focus: USD may strengthen on signs economy can withstand higher rates [E]

The dollar may gain for a second day on speculation statistics data signal in favor of the U.S. economy withstanding the higher interest rates. Results of FOMC meeting will be known tomorrow. As expected the key refinancing rate will raise a 17^th time to 5.25% from current 5-year high at 5%. (Federal Funds 25 years диаграмма Federal Funds 50 years диаграмма). This month USD strengthened 3.3% against the yen and 1.9% versus the euro. The rate rose after report showed that volumes of U.S. existing home sales reduced in May less than analysts’ predicted and Consumer Confidence improved (Consum. Confidence диаграмма).
The euro didn’t show much reaction on GfK report, which testified the growth of German Consumer Confidence to a 5-year peak. It strengthens the probability of further interest rate increase in Eurozone. Ifo Institute (IFO диаграмма) declared business confidence index climbed to the highest level since February 1991.

The yen may fall on speculation Japanese lawmakers will call on Bank of Japan Governor Toshihiko Fukui to resign his post. Fukui invested in a fund founded by Yoshiaki Murakami, who has been indicted for insider trading. Political pressure on Fukui to step down may hinder the central bank from “zero” interest rates policy. Four political parties on June 24 called for Fukui's resignation, and 67% of people surveyed said he should quit. However, Prime Minister Junichiro Koizumi today reiterated that he wants Fukui to complete his term, which ends March 2008.