By: Barbara Zigah
With Jean-Claude Trichet’s reassurance to the worlds’ markets that an interest rate hike was imminent to suppress rising inflation, the Euro is finding broad support in Asian trading today. As reported at 2:46 p.m. (JST) in Tokyo, the Euro is trading against the U.S. Dollar at $1.4101, a gain of 0.1%; yesterday the Euro struck a 1½ week low at $1.4020. Since January, the common currency has gained nearly 5.4% against the greenback.
One currency strategist in the U.K. noted that while there is some degree of certainty that an April interest rate increase is likely, beyond that the future remains unclear. In a speech yesterday, the ECB president noted that Eurozone inflation is well above the ECB’s 2% target. For the time being, inflationary pressures are taking center stage in the Eurozone, rather than the ongoing fiscal issues of the PIIGS. Regardless, the issue as to how Portugal will be able to resist an E.U./IMF bailout continues to return to the fore now and again.
The softness in the U.S. Dollar is still being attributed to the loose monetary policy adopted by the Federal Reserve Bank. In spite of recent hawkish comments from one Federal Reserve official last week which gave the greenback a temporary boost, another Board officer noted that the recovery of the U.S. economy is still fragile, and that the Bank’s QE bond purchases will continue through its planned end.