April 1, 2006	Saturday	Rabi-ul-Awwal 2, 1427

LONDON, March 31: The dollar rebounded against the euro and yen on Friday as the market studied the outlook for global interest rates. The euro fell to $1.2115 in European trading, from $1.2159 late on Thursday in New York.

The dollar rose to 117.52 yen, from 117.34 on Thursday.

In trading in Asia on Friday, the euro rose to as high as $1.2176, the highest point since March 20, before the dollar fought back.

The European single currency has won support this week as solid economic indicators for the eurozone stoked market expectations of further interest rate hikes by the ECB.

The euro continues to look strong, Commerzbank economist Gavin Friend said. Sentiment is euro bullish and it looks as if the single currency will go into the weekend well supported and is likely to remain above 1.2080 (dollars), he added.

ECB policymakers were to make their latest decision over eurozone borrowing costs next Thursday.

The extremely hawkish rhetoric from the ECB suggests that a further quarter-point rate hike cannot be ruled out at this meeting, although May is still the most likely month for action, HSBC analysts said.

The ECB had early this month raised its key interest rates by a quarter of a percentage point to 2.50 percent, the second tightening move since December.

On Tuesday, the US Federal Reserve decided as expected to raise its benchmark Federal funds rate by a quarter-point to 4.75 per cent, the highest level in five years.

The Bank of England is expected to keep British borrowing costs at 4.50pc at a meeting of policymakers next Thursday.

Meanwhile, the yen was slightly weaker against the dollar after Japan’s consumer inflation data came in slightly softer than expected.

Japan reported a fourth rise running in the core consumer prices index (CPI) with a year-on-year gain of 0.5 per cent in February, stirring speculation about when Japanese interest rates will rise as deflation ends.

The increase was slightly smaller than the 0.6 per cent the market had expected.

There had been yen-buying against the dollar before the CPI but the slightly softer than expected data saw the dollar bought back, said Yasuhisa Ishida, a senior forex manager at Chuo Mitsui Trust and Banking Company.

The euro was changing hands at $1.2115 against 1.2159 late on Thursday, 142.39 yen (142.69), 0.6967 pounds (0.6962) and 1.5796 Swiss francs (1.5775).

The dollar stood at 117.52 yen (117.34) and 1.3041 Swiss francs (1.2971).—AFP