Reply #39: Dollar Falls After Fukui, Issing Signal Higher Interest Rates

[54anickel]

http://www.bloomberg.com/apps/news?pid=10000087&sid=a60llS46rW3g&refer=top_world_news

Dec. 8 (Bloomberg) -- The dollar fell against the yen and the euro after Japanese and European policy makers suggested they will raise borrowing costs, reducing a gap with the Federal Reserve's benchmark rate that has left the U.S. currency poised for its best year since 2001.

Bank of Japan Governor Toshihiko Fukui said today an end to the bank's deflation-fighting policy is close while European Central Bank Chief Economist Otmar Issing warned of further rate increases should inflation pose a threat. The U.S. currency has risen 15 percent and 13 percent respectively versus the yen and euro this year as the Fed lifted its key rate seven times.

``I wouldn't expect much further strength for the dollar this year,'' said Steve Saywell, chief currency strategist at Citigroup Inc. in London ``A lot of people have been buying the dollar this year because of the rate advantage and eventually that will start to decline.''

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`Excuse To Buy'

``Fukui's comments could be used as an excuse to buy back the yen,'' said Gen Kawabe, a foreign-exchange manager in Tokyo at Chuo Mitsui Trust and Banking Co. Ltd. ``Markets have priced in that the so-called quantitative easing policy of pumping cash into the economy will end by next spring, and are very fixated on when the BOJ will raise interest rates from zero.''

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