American focus: USD ends quarter with losses on concerns Fed will pause [E]

USD continues yesterday’s decrease heading for biggest quarter losses since 2004. Pressure upon the dollar came after Federal Reserve gave cause for rumors about ending of rates increase in the USA. On Thursday the central bank lifted refinancing rate a 17^th time to 5.25%, however in accompanying statement Fed said that further steps on interest rates will depend on economic data. Considering that last data showed contained inflation growth, and pace of U.S. economic growth in Q1 justified analysts' expectations, it assumes, that interest rates differential between Europe and the USA may be reduced in future.

At the moment futures for federal funds are pricing in 57% chance of increase of Fed rate to 5.5% in August. This probability was 85% 2 days ago. Losses of dollar on Friday proceeded after U.S. Commerce Department testified growth of Americans spending on 0.4% in May, that below 0.7% in April. Price deflator justified experts’ forecasts, shown 2.1% growth, that still exceeds "target" value of the central bank in 2%. A separate report showed reduction of Chicago PMI to 59 in June from 61.5 in May. Median forecast was 59.0. Final index of customer confidence from Michigan University gained to 84.9 from 79.1 in May.

Meanwhile, analysts predict, ECB will lift interest rate to 3% during next 3 months, and to 3.25% by the end of year. According to last data, index of business confidence in region reached 5-years peak in June. This months at least 6 officials hinted at acceleration of ECB rates increase. Interest rate were boosted three times since December, 2005. JPMorgan Chase Co. economists this week raised forecasts for ECB rate to 3.75% by the end of a year. Bank also predicts increase on July 6.

Gains in yen may be temporary on the view of scandal about Bank of Japan Governor Toshihico Fukui. Political forces of Japan try to get Fukui’s resignation because he invested the fund founded by Yoshiaki Murakami, who has been indicted for insider trading. According to documents, the investments volume was $120,000.

The situation on Wall Street remains mixed after significant rally. General Motors stocks grew 5% after Kirk Kerkorian, one of the company's largest investors, urged automobile concern to consider a three-way partnership with Nissan Motor Corp. and Renault SA.