Dollar News

Dollar May Extend Gain on Bernanke's Comment, Crude Oil Decline

By Ye Xie and Candice Zachariahs

July 9 (Bloomberg) -- The dollar may rise against the euro for a second day after Federal Reserve Chairman Ben S. Bernanke said the central bank may extend its emergency-loan program for securities firms into next year and crude oil prices tumbled.

The U.S. currency advanced yesterday, erasing losses that came at the start of the week on concern Fannie Mae and Freddie Mac, the two largest mortgage finance companies, may need to raise additional capital.

``Bernanke is telling the market that the Fed will be there if there's any problem,'' said Joe Trevisani, chief market analyst in Saddle River, New Jersey, at FX Solutions LLC, a foreign-exchange brokerage. ``The Fed has calmed down the markets. If oil continues to come down, the dollar may strengthen further.''

Against the euro, the U.S. currency traded at $1.5665 at 6:37 a.m. in Tokyo, after rising 0.4 percent yesterday. The dollar traded at 107.43 yen, following a 0.3 percent increase. Japan's currency was at 168.30 per euro, after a 0.1 percent gain.

The dollar strengthened yesterday as Bernanke said in a speech in Arlington, Virginia, that the Fed is committed to financial stability and is ``considering several options, including extending the duration of our facilities for primary dealers'' beyond year-end.

``Markets are going through another bout of turbulence, and they're willing to act to counter those forces,'' said Samarjit Shankar, director of global strategy for the foreign-exchange group in Boston at Bank of New York Mellon, on Fed policy makers. ``That's where the support for the dollar is coming from.'' The firm is the world's largest custodial bank, with about $23 trillion in assets under administration.

Dollar's Decline

The Fed's Primary Dealer Credit Facility, which provides direct loans, and the Term Securities Lending Facility, which auctions as much as $200 billion in Treasuries, were created in March in response to the credit crisis. Both programs are aimed at the 20 primary dealers in U.S. government debt.

The dollar has fallen 11 percent against the euro since September, when the Fed made the first of seven reductions in the target lending rate, now 2 percent, to prevent the housing slump and credit losses from plunging the U.S. economy into a recession. The European Central Bank raised its main refinancing rate last week to a seven-year high of 4.25 percent.

Richmond Fed President Jeffrey Lacker told reporters in Washington yesterday that the weak dollar may fuel ``inflation pressures,'' echoing Bernanke's comments last month that policy makers are ``attentive'' to the effect of the dollar's decline. Lacker said in a speech yesterday that the central bank should consider raising interest rates to limit inflation as the threat of a steep economic slump begins to fade.

Crude Oil

Bernanke and U.S. Treasury Secretary Henry Paulson are scheduled to testify before Congress tomorrow.

The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, yesterday increased as much as 0.6 percent to 73.082, the highest level since June 24.

Crude oil for August delivery fell for a second day, dropping more than 3 percent to $135.90 yesterday. It reached a record high of $145.85 a barrel on July 3. The euro-dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.

China's yuan appreciated 0.2 percent to 6.8511 per dollar, near the strongest since a dollar link ended in July 2005, on speculation the government will allow faster gains in the currency to help curb inflation.

The U.S. currency fell 0.1 percent against the euro on July 7 as a report from Lehman Brothers Holdings Inc. said Fannie and Freddie may need to raise a total of $75 billion because of an accounting change. They have enough capital to survive the housing slump and meet new accounting rules, James Lockhart, the director of the Office of Federal Housing Enterprise Oversight, told Bloomberg Television yesterday.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.

Last Updated: July 8, 2008 17:42 EDT

Dollar Rises to One-Week High as Group of Eight Leaders Convene

Dollar Rises to One-Week High as Group of Eight Leaders Convene

July 7 (Bloomberg) -- The dollar rose to the highest level against the euro in more than a week as leaders of the Group of Eight nations convened in Japan.

The 15-nation euro and the pound dropped against the dollar as German and British industrial production fell in May. The yen weakened against the euro and the dollar as global stocks advanced, reviving demand for higher-yielding assets funded by loans in Japan. President George W. Bush, in Japan for the summit, reiterated support yesterday for a ``strong'' dollar.

``With the G-8 meeting in the background, the near-term sentiment of the dollar is improving,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``They prefer a strong dollar.''

The dollar increased 0.5 percent to $1.5624 per euro at 9:52 a.m. in New York, from $1.5706 on July 4. It touched $1.5611, the strongest level since June 25. The yen dropped 0.8 percent to 107.70 per U.S. dollar, from 106.80. Japan's currency fell 0.3 percent to 168.29 versus the euro, from 167.73.

South Korea's won rose against all of its major counterparts after the government pledged ``stern action'' to stabilize the local currency. The won climbed 0.7 percent to 1,042.90 per dollar, from 1,050.35 on July 4.

The dollar strengthened versus the euro on speculation U.S. officials will say the currency has fallen too far and try to stem gains in oil prices as the G-8 summit gets under way in Japan. Leaders from Canada, France, Germany, Italy, Japan, Russia, the U.K. and the U.S. are meeting for three days.

Bush on Dollar

Bush said yesterday on the first day of his five-day trip to Japan that the U.S. will continue to pursue a strong dollar.

``The U.S. believes in a strong-dollar policy,'' he said at a news conference with Japanese Prime Minister Yasuo Fukuda in Tokyo. The U.S. economy remains fundamentally strong even as growth has slowed, Bush said.

The Dollar Index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, rose as much as 0.6 percent to 73.151, the highest level since June 24.

The U.S. currency also appreciated as crude oil fell after Iran's Foreign Minister Manouchehr Mottaki expressed confidence in talks with Western governments on the country's nuclear program. Organization of Petroleum Exporting Countries President Chakib Khelil said yesterday record oil prices are more related to the dollar exchange rate than supply.

Crude Oil Falls

Crude oil for August delivery fell 1.6 percent to $143.02 a barrel on the New York Mercantile Exchange. Oil reached a record $145.85 a barrel on July 3.

The euro fell against the dollar as German industrial production unexpectedly dropped 2.4 percent in May, its third straight decline, prompting traders to pare bets the European Central Bank will raise the main refinancing rate for a second time this year.

``We do see the euro weaker,'' said Stuart Bennett, a senior European strategist at Calyon, the investment-banking unit of Credit Agricole SA, France's second-biggest lender. ``We are not relaxed about the growth outlook, and it's weaker than the ECB is accepting. Even though we suspect inflation means that they might have to hike again, the growth dynamics for Europe are pointing toward a weaker euro.''

The euro will fall to a range of $1.43 to $1.45 by the end of the year, Bennett predicted.

Trichet's `No Bias'

The 15-nation currency declined last week after ECB President Jean-Claude Trichet said he had ``no bias'' on borrowing costs following the decision to raise the main refinancing rate by a quarter-percentage point to 4.25 percent.

The British pound weakened to the lowest level against the dollar in almost two weeks after U.K. factory output fell 0.5 percent in May. The median forecast of analysts surveyed by Bloomberg News was for no change.

JPMorgan Chase & Co., the third-largest U.S. bank, predicted the Bank of England will keep the target lending rate at 5 percent ``for the time being,'' a change from its previous estimate for higher rates in August.

The pound slid as much as 0.9 percent to $1.9649 against the dollar, the lowest since June 24, from $1.9823 on July 4.

Japan's currency dropped 1.1 percent to 13.97 versus the South African rand and 1 percent to 10.44 against the Mexican peso as a rally in stocks encouraged investors to add to holdings of higher-yielding assets funded in Japan.

The MSCI Asia-Pacific Index gained 0.4 percent, while Europe's Dow Jones Stoxx 600 Index strengthened 1.7 percent. The Standard & Poor's 500 Index climbed 0.9 percent.

In the carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates. Japan's target lending rate of 0.5 percent is the lowest among major economies and compares with 12 percent in South Africa and 7.75 percent in Mexico.

Dollar VS Euro NEWS

Dollar Little Changed Versus Euro Before Fed Decision on Rates

June 25 (Bloomberg) -- The dollar was little changed against the euro before the Federal Reserve ends a two-day meeting at which policy makers are forecast to keep the target lending rate at the lowest level in more than three years.

The dollar pared its decline as crude oil prices fell on an unexpected increase in inventories, reducing the need to sell the U.S. currency as a hedge against inflation. Fed Chairman Ben S. Bernanke said on June 9 the central bank would ``strongly resist'' a leap in inflation expectations.

``The Fed will fall short of the most hawkish of expectations,'' said Nick Bennenbroek, head of currency research at Wells Fargo & Co. in New York. ``The dollar will come under a little bit of pressure.''

The dollar traded at $1.5575 per euro at 10:51 a.m. in New York, compared with $1.5568 yesterday. The dollar rose 0.2 percent to 108.07 yen, from 107.82. The euro increased 0.3 percent to 168.32 yen, from 167.85, and touched 168.46, the strongest level since July 23.

The Norwegian krone advanced to a two-week high against the dollar after Norges Bank increased its target lending rate to 5.75 percent. The krone strengthened 0.3 percent to 5.0989 per dollar and touched 5.0854, the highest level since June 10. The central bank's decision had been expected by nine of the 20 economists surveyed by Bloomberg News.

The U.S. currency has fallen from a one-month high of $1.5303 per euro reached on June 13, four days after Bernanke said economic risks have faded and accelerating inflation ``would be destabilizing for growth.''

Fed Rate Outlook

The Fed will keep the 2 percent target lending rate unchanged today, all 102 economists surveyed by Bloomberg News predict. The chance policy makers will increase borrowing costs by a quarter-percentage point is 10 percent, compared with 14 percent odds a week ago, futures contracts on the Chicago Board of Trade show. The chance the Fed will raise the rate by at least a quarter-percentage point in August is 39 percent.

New home sales fell to an annual pace of 512,000 in May, from a revised 525,000 the prior month, the Commerce Department reported today in Washington.

Orders for durable goods excluding transportation items dropped 0.9 percent in May after a revised 1.9 percent increase the prior month, the Commerce Department also said. The median forecast of 38 economists surveyed by Bloomberg News was for a decrease of 1 percent.

`Growth Concerns'

``Due to the underlying growth concerns, it will be very difficult for the Fed to hike rates this year,'' said Matthew Strauss, a currency strategist at RBC Capital Markets in Toronto. ``That means the market has gotten a little bit ahead of itself pricing in rate increases, and the dollar will come under pressure.''

The dollar has gained 1.3 percent against the euro this quarter as traders bet the economic slowdown sparked by the collapse of the subprime-mortgage market will spread to Europe as the U.S. recovers.

European Central Bank President Jean-Claude Trichet left open today the option of raising interest rates again after July to contain accelerating inflation. He told the European Parliament in Brussels that inflation in the euro area has ``intensified further in recent months'' and that the bank is in a state of ``heightened alertness.''

The euro may rise to a record 169 yen should it stay above its five-day moving average, said Masashi Hashimoto, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.

The current five-day moving average is 167.59 and represents a level of so-called support, said Tokyo-based Hashimoto, citing technical charts traders use to predict price movements. The euro reached a record high of 168.99 yen on July 23. Support is an area where buy orders may be clustered.

``Should the euro stay beyond its five-day moving average, and should the average show the upward trend, the euro will have a high chance to reach its record high,'' Hashimoto said.

Dollar news

Dollar Falls as New York Factories Contract, G-8 Stops Short

June 16 (Bloomberg) -- The dollar fell the most against the euro in more than a week as New York state manufacturing shrank in June and the Group of Eight's weekend summit stopped short of calling for a strong U.S. currency.

An index tracking the dollar against the currencies of six major U.S. trading partners dropped from the highest level since February. The Norwegian krone was the biggest gainer versus the dollar among the major currencies and the Canadian dollar appreciated the most against the greenback in almost a month as crude oil surged to a record $139.89 a barrel.

``There's further room for disappointment for dollar bulls,'' said Mike Moran, senior currency strategist at Standard Chartered Bank in New York. ``The economy is still weak. There was too much expectation for the G-8 to say something to support the dollar.''

The dollar declined 0.6 percent to $1.5464 per euro at 10:58 a.m. in New York, from $1.5380 on June 13. The U.S. currency traded at 108.27 yen, compared with 108.19. The yen dropped 0.7 percent to 167.43 versus the euro, from 166.35, and touched 167.68, the weakest level since Oct. 15.

The U.S. currency fell 0.9 percent to 5.1825 against the Norwegian krone and 0.6 percent to C$1.0236 versus the Canadian dollar as crude oil surged. Commodities such as oil and gold make up half of Canada's exports, while Norway is the world's fifth-largest oil producer.

The dollar falls against the euro when oil rises 93 percent of the time, according to Bloomberg calculations based on value changes. Crude oil for July delivery rose to $137.93 a barrel after touching the all-time high.

`Under Pressure'

``As long as oil keeps rallying, the dollar will be under pressure,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York.

The yen fell to an eight-month low versus the euro as reduced currency volatility encouraged investors to buy higher- yielding assets funded by low-cost loans in Japan.

Japan's currency dropped 0.9 percent to 212.50 versus the pound and 0.3 percent to 81.33 against the New Zealand dollar as investors increased carry trades in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.5 percent compares with 2 percent in the U.S., 4 percent in the euro zone, 5 percent in the U.K. and 8.25 percent in New Zealand.

The risk that fluctuating exchange rates will erase carry- trade profits fell. Implied volatility on one-month euro-yen options dropped for a fourth day, declining to 10.09 percent, from 10.31 percent on June 13.

Dollar Versus Yen

The U.S. currency will rise to 110 against the yen by year- end from a previous estimate of 103, and will climb to 112 by the end of March, from a previous forecast of 105, Tokyo-based JPMorgan Chase & Co. currency strategists Tohru Sasaki and Junya Tanase wrote in a research note today.

The U.S. Dollar Index traded on ICE futures decreased for the first time in three days, falling 0.6 percent to 73.73. It touched 74.314 on June 13, the highest since Feb. 28.

The U.S. currency weakened versus the euro as a gauge of New York state manufacturing dropped. The New York Fed's general economic index decreased to minus 8.7 in June from minus 3.2 the prior month. Readings less than zero signal contraction. The New York Fed began its Empire State gauge in 2001.

The euro rose earlier versus the dollar after the European Union's statistics office reported that the inflation rate rose to 3.7 percent in May, the highest level since June 1992.

G-8 Meeting

The G-8, which comprises the U.S., Japan, Russia, Germany, France, the U.K., Italy and Canada, stuck to its practice over the weekend of not making a joint comment on currencies when central bankers are absent.

``The world economy continues to face uncertainty, and downside risks persist,'' G-8 officials said in a statement on June 14 after a meeting in Osaka, Japan. ``Elevated commodity prices, especially of oil and food, pose a serious challenge.''

The U.S. currency rose last week the most against the euro since 2005 as Federal Reserve Chairman Ben S. Bernanke said economic risks have faded, raising speculation policy makers will increase borrowing costs this year to contain inflation. The yield on two-year Treasury notes posted its biggest weekly increase in 26 years last week, rising 66 basis points to above 3 percent.

``The perception that the Fed will hike rates is still strong,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``Short-term rates have risen quite sharply the last couple of weeks, and that will keep the dollar sustained.''

The dollar will strengthen 3 percent to $1.50 per euro by year-end, according to the mean estimate of 39 firms surveyed by Bloomberg. Economists anticipate that the ECB will raise rates a quarter-percentage point by September and then cut borrowing costs by year-end. The Fed will boost rates three-quarters of a percentage point by the end of the third quarter of 2009, according to data compiled by Bloomberg.

Dollar Trades Near Two-Week High Against Euro on U.S. Services

Dollar Trades Near Two-Week High Against Euro on U.S. Services

June 4 (Bloomberg) -- The dollar traded near a two-week high against the euro after a report showed U.S. services industries expanded in May at a faster pace than forecast, indicating the economy is weathering record gasoline prices.

``The tone is still dollar-bullish for the day,'' said Boris Schlossberg, senior currency strategist in New York at DailyFX.com, an online currency dealer. ``The non-manufacturing sector is still expanding.''

The dollar traded at $1.5451 per euro at 10:30 a.m. in New York, compared with $1.5445 yesterday, when it touched $1.5411, the highest level since May 14. The dollar was at 105.08 yen, unchanged from yesterday. Japan's currency traded at 162.35 per euro, compared with 162.32.

The Institute for Supply Management's index of non- manufacturing businesses decreased to 51.7 last month from 52 in April. The median forecast of 73 economists surveyed by Bloomberg News was for a drop to 51. A reading of 50 is the dividing line between growth and contraction.

Australia's dollar rose against all of the other major currencies after a government report showed the economy grew in the first quarter at twice the pace economists forecast. The Aussie rose 0.9 percent to 96.07 U.S. cents after touching 94.87 U.S. cents, the lowest level since May 16. It strengthened to 96.54 U.S. cents on May 21, the highest level since it began trading freely in 1983.

Company Hiring

A private report based on payroll data showed U.S. companies unexpectedly added jobs in May. The 40,000 increase followed a revised gain of 13,000 for the prior month that was more than previously estimated, ADP Employer Services said. The median forecast of 25 economists surveyed by Bloomberg News was for a reduction of 30,000.

The dollar touched a two-week high against the euro yesterday after Federal Reserve Chairman Ben S. Bernanke said via satellite to a conference in Barcelona, Spain, that policy makers are ``attentive'' to the weakened dollar's effect on inflation. He said interest rates are ``well positioned'' to promote growth and stable prices, signaling the Fed is done cutting interest rates.

``We do like the dollar higher, but a little too much was made out of Bernanke's comments,'' said Win Thin, a New York- based currency strategist at Brown Brothers Harriman & Co., in an interview on Bloomberg Television. ``They caught the short term players wrong-footed. There was a lot of short squeezes,'' meaning traders had to buy the dollar to exit bets that it will fall, minimizing losses.

Futures on the Chicago Board of Trade show a 63 percent chance the Fed will raise the 2 percent target rate for overnight lending between banks by at least a quarter-percentage point by December, compared with 59 percent odds a month ago.

The dollar has increased 3.5 percent since touching the all-time low of $1.6019 per euro on April 22, as the Fed signaled it will stop cutting interest rates. It will strengthen to $1.50 against the euro and trade at 105 yen by the end of the year, according to the median forecast of 41 economists surveyed by Bloomberg News.

Today Dollar NEWS PREDIKSI (PREDICTION FOREX MARKET)

Yen Falls to 1-Month Low as U.S. Stocks Gain, Spur Carry Trade

May 27 (Bloomberg) -- The yen fell to a one-month low against the euro and dropped versus the dollar as an advance in U.S. stocks encouraged investors to add to holdings of higher- yielding assets funded in the Japanese currency.

The yen declined against the Australian and the New Zealand dollars, two favorites of so-called carry trades. The Australian dollar traded close to a 25-year high versus its U.S. counterpart, while the kiwi dollar gained a sixth straight day. The U.S. dollar extended gains versus the yen and euro as new- home sales in the U.S. unexpectedly rose in April.

``We are seeing improvement in risk appetite, and that's weakening the yen,'' said Samarjit Shankar, director of global strategy for the foreign exchange group in Boston at Bank of New York Mellon. The firm is the world's largest custodian bank, with more than $20 trillion in assets under administration.

The yen touched 163.89 per euro, the weakest since April 28, before trading at 163.82 at 10:07 a.m. in New York, from 163.10 yesterday. It declined to 104.29 per dollar, from 103.43. The euro fell to $1.5708, from $1.5770 yesterday, after rising to $1.5818, the highest level since April 24.

The Standard & Poor's 500 Index rose 0.6 percent.

In the carry trade, investors get funds in a country with low borrowing costs and invest in another with higher interest rates, earning the difference between the two. The risk is currency moves erase those profits.

Japan's benchmark rate of 0.5 percent compares with a central bank rate of 4 percent in Europe, 2 percent in the U.S., 7.25 percent in Australia and 8.25 percent in New Zealand.

Euro's Reversal

The euro reversed gains versus the dollar after reports showed German consumer confidence fell more than economists forecast and French business confidence declined to the weakest in more than two years in May.

GfK AG's index for June declined to 4.9, from 5.6 in May, the Nuremberg-based market-research company said today. Economists in a Bloomberg survey predicted the gauge would fall to 5.7, from an initial May estimate of 5.9. An index of sentiment among 4,000 French manufacturers slid to 102, the lowest since December 2005, from 106 in April, the country's statistics office said.

``We see weakness developing in many aspects and that's why we are seeing a retreat'' from the euro, said Hans-Guenter Redeker, global head of currency strategy in London at BNP Paribas SA, France's biggest bank.

Consumer Prices Rise

Consumer prices in the euro region rose 3.5 percent in May, faster than the 3.3 percent gain the previous month, according to a Bloomberg News survey. The statistics office will release the figure on May 30.

The dollar extended gains as new-home sales in the U.S. rose 3.3 percent to an annual pace of 526,000 from a 509,000 rate the prior month that was the lowest in 17 years, Commerce Department data showed. A separate report today showed home prices dropped last quarter by the most in at least 20 years.

Confidence among U.S. consumers fell to the lowest level in more than 15 years. The Conference Board's confidence index declined more than forecast to 57.2, the lowest level since October 1992, from a revised 62.8 in April, the New York-based research group said.

Dollar News

Dollar Snaps Two-Day Drop on Rising Bets for Fed Rate Increase

May 22 (Bloomberg) -- The dollar snapped two days of declines against the euro, rallying from the lowest level in a month, as traders added to bets the Federal Reserve will raise interest rates by year-end.

The U.S. currency also gained versus the yen after minutes of the Fed's April meeting yesterday showed most policy makers viewed the cut in the target rate to 2 percent as ``a close call,'' indicating the central bank has gone on hold to stem inflation. The New Zealand dollar rose to a two-week high after tax cuts reduced the need to lower borrowing costs.

``The Fed is telling us to not think in terms of easing,'' said Alan Ruskin, head of international currency strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut. ``That is the most important feature behind the dollar comeback today.''

The U.S. currency strengthened to $1.5708 per euro as of 10:22 a.m. in New York, from $1.5795 in New York yesterday. It earlier touched $1.5814, the lowest level since April 24. The dollar rose to 104.04 yen, from 103.05 yen. The euro traded at 163.44 yen, up from 162.76 yen.

The dollar extended its gains after U.S. house prices fell less than expected in the first quarter. The Office of Federal Housing Enterprise Oversight said its house price purchase index declined 0.2 percent, from a revised 0.3 percent gain the previous quarter. The median forecast in a Bloomberg News survey of 13 economists was for a drop of 1.3 percent.

The New Zealand dollar rose after Finance Minister Michael Cullen cut taxes, easing pressure on the central bank to lower interest rates to support the economy. The kiwi, as it is known, climbed to 78.96 U.S. cents, the highest level since May 7, before trading at 78.54 cents, from 77.70 yesterday.

Fed Rate Bets

The Australian dollar yesterday touched the highest since being allowed to trade freely in 1983 as investors sought the nation's higher-yielding debt. The currency, which climbed to as high as 96.54 U.S. cents yesterday, was at 95.84 cents today, from 96.25. The Aussie has risen 10 percent this year, the second-biggest gain among the 16 most-traded currencies.

The Aussie will climb to equal value with the U.S. currency for the first time since 1982 as the central bank considers raising interest rates, say banks including RBC Capital Markets and ABN Amro Holding NV.

Futures on the Chicago Board of Trade show traders see a 92 percent likelihood the Fed will keep its target rate for overnight lending between banks at 2 percent on June 25, up from odds of 88 percent yesterday. Traders also see a 32 percent probability the Fed will lift the rate in September to 2.25 percent, up from a 21 percent chance yesterday.

``The Fed has a more balanced view on inflation and growth,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets. The dollar decline has ``lost momentum.''

ECB Interest Rate

The dollar has fallen 2 percent against the euro since May 8, after European Central Bank President Jean-Claude Trichet said inflation remains the bank's top priority. That signaled policy makers won't cut the 4 percent benchmark interest rate soon.

The dollar advanced to $1.9806 against the British pound, from $1.9732, and was at 1.0334 versus the Swiss franc, from 1.0250. The Fed cut its 2008 economic growth projection to a range of 0.3 percent to 1.2 percent, from its January forecast of 1.3 percent to 2 percent, according to the minutes.

The Dollar Index traded on ICE futures in New York, which tracks the dollar against currencies of six trading partners, rose to 72.071, from 71.938 yesterday.

Oil Price

Gains for the dollar may be limited as record oil prices stoke inflation while slowing economic growth, said Hans-Guenter Redeker, global head of currency strategy in London at BNP Paribas SA, France's biggest bank. Oil surpassed $135 a barrel for the first time today before settling back to around $133.

``The dollar will remain on the back foot,'' Redeker said. It will be hurt by ``further increases in commodity prices.''

The euro climbed versus the dollar yesterday after German business confidence unexpectedly rose, bolstering speculation the ECB won't cut interest rates.

The Munich-based Ifo institute said its index, based on a survey of 7,000 executives, rose to 103.5, from 102.4 in April. Economists predicted a decline to 102, according to the median of 44 forecasts in a Bloomberg News survey. Germany is the biggest economy in the euro region.

The euro may rise to $1.5850 against the dollar in one week, based on charts used to predict price movements, said Masashi Hashimoto, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd.

The currency has held above so-called support at the five- and 21-day moving averages of $1.5663 and $1.5553, respectively, signaling further gains in the near term, Tokyo-based Hashimoto said. Support is where buyers are expected to outweigh sellers.

The resistance level of $1.5850 represents a 76.4 percent reversal of the euro's slide to a low of $1.5285 on May 8, from a record high of $1.6019 on April 22, based on a series of numbers known as the Fibonacci sequence. Resistance is a level where selling is expected to outweigh buying.