By Masayuki Kitano
TOKYO, April 11 (Reuters) - The euro inched up against the
dollar on Friday, but stayed well off a record high after
European Central Bank President Jean-Claude Trichet expressed
concerns about foreign exchange volatility.
On Thursday, the euro jumped to an all-time peak against the
dollar but later gave up its gains after Trichet said the recent
volatility in foreign exchange markets was excessive and was to
be deplored. []
Trichet's remarks triggered profit-taking in the euro, which
dropped nearly two cents at one point on Thursday after hitting
the record high.
Despite the pull-back, the euro seems poised to rebound once
Friday's meeting of Group of Seven finance ministers and central
bankers is out of the way, market players said.
"There probably will not be any policy coordination on
foreign exchange, and the dollar seems likely to stay weak for a
while," said Tomoko Fujii, head of economics and strategy for
Japan at Bank of America.
She said the euro could rise to $1.60 by the end of June.
The euro stood at $1.5780 <EUR=>, up from around $1.5745 in
late U.S. trading on Thursday but well off a record peak of
$1.5915 hit on electronic trading platform EBS on Thursday.
The dollar rose to around 102.00 yen <JPY=>, edging back
towards a one-month high of 102.95 yen hit last week.
Signs of a rise in risk appetite such as a 2.9 percent rally
in Japan's benchmark Nikkei share average <> gave a lift to
higher-yielding currencies against the yen, traders said.
The euro rose to 160.90 yen <EURJPY=R>, having rebounded
sharply after falling as low as about 158.80 yen on Thursday.
BOJ Governor Masaaki Shirakawa, speaking to reporters in
Washington ahead of the G7 meeting, said the Group of Seven needs
to express clear determination to stabilise the financial system.
[]
But the G7 seems unlikely to come up with any major surprises
on efforts to tackle the ongoing credit market crisis, said Bank
of America's Fujii.
U.S. Treasury Under-Secretary David McCormick said on
Wednesday that the United States would not back the use of
taxpayer money to help stabilise housing and financial markets.
[]
MONETARY POLICY
Speaking after the ECB held interest rates steady at 4.0
percent on Thursday as had been widely expected, Trichet warned
that financial market tensions could last longer and hurt the
euro zone economy more than expected. []
But Trichet also said short-term upward pressure on inflation
remains strong and has increased of late, underscoring market
expectations that the ECB would keep rates steady for a while
rather than lower them.
That contrasts with market expectations for the U.S. Federal
Reserve to cut interest rates further from 2.25 percent.
Analysts said they were eyeing next week's slew of data
including retail sales, producer prices and consumer prices to
gauge the state of the U.S. economy, as well as quarterly
earnings announcements by U.S. banks next week. []
"With doubts about the G7 coming up with effective,
coordinated measures, the dollar remains pressured by lingering
concerns about U.S. banks' earnings and economic data, which
could dash recent optimism," said Hideki Hayashi, chief economist
at Shinko Securities.
The euro dipped slightly against sterling to 79.78 pence
<EURGBP=D4> from around 79.85 pence in late New York and off a
record high of 80.30 pence struck on Thursday.
In contrast to the ECB's decision to keep interest rates
unchanged, the Bank of England cut interest rates by a quarter
percentage point to 5.0 percent on Thursday.
The BoE had been widely expected to lower interest rates
after data pointed to a downturn in the housing market, falling
consumer confidence and a slowing economy. []
(Additional reporting by Chikako Mogi)
