Dollar strengthens in London

The dollar strengthened against the euro on Thursday, as investors adjusted positions in the run-up to Christmas holidays and as the greenback drew support from recent stronger-than-expected US data.
The Swiss franc fell to three-week lows against the dollar and four-week lows against the euro after the Swiss National Bank more than halved 2007 inflation forecasts and raised interest rates as expected.
The rates outlook also hurt the yen, which hit record lows against the euro and eight-year troughs against both the Swiss franc and sterling on growing expectations that the Bank of Japan would leave interest rates steady next week rather than raise them.In the United States, expectations of a near-term interest rate cut have been scaled back after stronger-than-expected retail sales and jobs data, helping the dollar recover from last week's 20-month lows against the euro. "The upside in the euro looks rather limited, after the recent better than expected US data," said Carsten Fritsch, currency strategist at Commerzbank Corporates & Markets in Frankfurt.
He added that currency moves were accentuated as investors squared positions and volumes thinned ahead of the Christmas and New Year holidays. The euro fell around 0.15 percent to $1.3193 by 1222 GMT, nearly three cents below recent 20-month highs. The euro rose to a four-week high of 1.5997 Swiss francs, just 16 ticks short of last month's 6-1/2 year peaks. The dollar climbed about half a percent against the Swiss franc to three-week highs of 1.2131 francs.
The SNB cut its forecast for average 2007 inflation to 0.4 percent from the previous 1.1 percent. "It does seem they will hike at least once more in March, but it certainly means that they're not going to raise rates aggressively and that's weighing on the Swiss franc," said Adarsh Sinha, currency strategist at Barclays Capital.
SNB chief Jean-Pierre Roth said the franc's recent weakness contradicted a good Swiss economic situation, adding the bank was monitoring the exchange rate very closely.
The euro rose to a record high of 155.60 yen, before erasing gains to stand at 155.12. The yen hit eight-year lows against sterling and the Swiss franc. It also fell to a three-week low of 117.65 per dollar earlier. Analysts said an article in Japan's Nihon Keizai newspaper on Thursday accelerated the yen's recent weak trend, coming after a run of weak Japanese data.