NEW YORK, June 21: The dollar weakened against the euro Friday on expectations of higher interest rates in the eurozone and a growing conviction that the US Federal Reserve will keep its rates on hold.

The single European currency rose to $1.5611 from 1.5503 late Thursday.

The dollar slipped to 107.25 yen from 107.97.

The US currency came under pressure during the day on speculation that US Federal Reserve policymakers would make no change in their monetary policy at a meeting Wednesday despite mounting inflationary pressures.

Various statements by (Fed) officials had supported the dollar over recent weeks, but market participants remain very uncertain whether the Fed will be able to raise rates, analysts at Barclays Capital said in a client note.

Even if members (of the Fed’s rate-setting committee) continue to stress inflationary concerns, the impact of their words is likely to be subject to diminishing marginal returns if unaccompanied by actions. At CMC Markets, Ashraf Laidi said the Federal Open Market Committee, while holding rates steady, could even highlight easing inflationary pressures.

Next week’s (Fed) decision is expected to keep rates unchanged at 2.0 per cent, with a statement that would express deteriorating inflationary conditions and an alertness towards weakening economic data, he said.

The euro by contrast received a boost on forecasts that the European Central Bank would raise interest rates by a quarter point to 4.25 per cent at a July 3 meeting.

Inflation is once again the main source of concern in the 15-nation eurozone, a view further supported by the limited amount of economic news Friday.

Along with high inflation data, the figures have buoyed speculation that the Bank of England may raise interest rates in the short term, although many analysts say it is more likely that the central bank will remain in a wait-and-see mode as long as most economic data points to a sharp slowdown ahead.

In late New York trading, the dollar was at 1.0350 Swiss francs, down from 1.0452 late Thursday.—AFP