LONDON, Oct 21: The dollar was higher on Friday against the euro but its momentum was checked as traders priced in prospects for higher interest rates in the United States. The single European currency in late-day trade was at $1.1966, against $1.2018 late Thursday in New York.
The dollar was meanwhile trading at 115.92 yen after 115.33 on Thursday.
“The dollar had strengthened because of yield differentials. Now central bankers around the world, not just in the US, are cranking up the threat of inflation. The differential is now narrower,” said Marios Maratheftis a currency strategist at Standard Chartered in London.
Central bankers as far flung as South Africa and Canada have been talking about rising price pressures. In Europe too, the rhetoric has been decidedly hawkish.
European Central Bank chief economist Otmar Issing warned on Friday that the latest eurozone inflation numbers are far above the levels compatible with the goal of price stability.
As a result, the yield differential between the United
States and elsewhere is diminishing and the dollar is not as attractive as it used to be as a high yielding currency, said Maratheftis.
Some analysts also believe that all the focus on inflation has raised concerns about the potential impact on growth.
“We are becoming concerned that more hawkish Fed comments on the need to curb inflationary pressures is now damaging rather than supporting investor sentiment,” said Mansoor Mohi-uddin at UBS.
Investors showed their concerns by selling down the dollar and US stocks.
On the London Bullion Market, the price of an ounce of gold fell to $462.85 from $464.30 late on Thursday.—AFP
