LONDON, June 18: The dollar gained ground on Wednesday after a series of positive US economic figures tempered expectations of a sizeable interest rate cut by the Federal Reserve next week.

The single European currency was trading at $1.1757 from 1.1777 late on Tuesday in New York.

The dollar was at 118.42 yen against 118.10 on Tuesday.

The main driver was a better than expected rise in US consumer prices, which were unchanged in May from April, but 2.1 per cent up from the same month of 2002.

This removed some of the fears about deflation possibly taking a hold of the US economy, lessening the need for a significant business-boosting interest rate cut when Federal Reserve policymakers meet in a week’s time.

Additionally, there were small signs of recovery in figures for US industrial output and new housing projects, also released on Wednesday.

The inflation data, along with very strong housing stats data and a moderately positive industrial production report, has underpinned the market’s belief that the Federal Reserve will opt for a more modest 0.25 point cut in the federal funds rate on 25th June, he said.

That belief, along with the continued resilience of the US equity markets has tempered the foreign exchange market’s enthusiasm for selling the dollar.

Although the fears of deflation were not necessarily justified, given these concerns and the imminent Federal Reserve meeting, the market reaction was understandable, added Commerzbank analyst Kamal Sharma.

The main economic indicator for Wednesday, euro-zone inflation, was expected to have little impact after figures showed the expected 1.9 per cent rise in prices during May, compared with 12 months before.

The euro was changing hands at $1.1757 from 1.1777 late on Tuesday in New York, 139.24 yen (139.10), 0.6992 pounds (0.6991) and 1.5424 Swiss francs (1.5416).

The dollar was being quoted at 118.42 yen (118.10) and 1.3119 Swiss francs (1.3090).

The pound was at 1.6809 dollars (1.6835), 199.04 yen (198.82) and 2.2050 Swiss francs (2.2037).

On the London Bullion Market, the price of an ounce of gold stood at $361.95 from 362.75 on Tuesday afternoon. —AFP