Dollar to refocus on interest rates

26 Apr, 2004

The US dollar will likely refocus on interest rates and the economy when foreign exchange markets open on Monday after top finance officials at the weekend stuck to old verbiage on currencies.
Analysts said the fact that Group of Seven finance ministers and central bankers repeated verbatim their prior meeting's currency language was what the market had expected so it should not ruffle the dollar.
Finance officials from the world's leading economic powers met on Saturday in Washington to consider the global economy.
The unchanged wording could leave the greenback's recovery path since February's G7 meeting in Boca Raton, Florida, intact, analysts said.
The Washington G7 communique "is really status quo. We are basically in the same mode as in Boca," said Marcel Kasumovich, head of G10 foreign exchange strategy at Merrill Lynch in New York.
The Washington G7 communique repeated that excess volatility and disorderly movements in exchange rates were undesirable, while again urging more currency flexibility in nations that did not have flexible systems.
Analysts interpreted the volatility wording to mean that the G7 was still wary of any resurgence of euro strength, although the single European currency has shed some 7 percent against the dollar since the February meeting.
As for the yen, some traders had warned prior to Saturday's meeting of a slight risk Japan could be criticized for its hefty yen-selling currency interventions earlier this year.

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