Reply #54: Dollar hits 3-week euro high, falls back

[UpInArms]

http://cbs.marketwatch.com/news/story.asp?guid=%7B9D03E0A7%2D9EC7%2D44D9%2DB3AA%2D3F4F422664C2%7D&siteid=mktw

WASHINGTON (CBS.MW) - The dollar hit its best level against the euro in three weeks before paring gains in U.S. trading Wednesday, amid heightened prospects that the U.S. Federal Reserve would continue to raise interest rates.

The dollar's mostly technical-driven, early-year bounce from December's multiyear lows was accelerated by the release on Tuesday of minutes from the Fed's Dec. 14 policy meeting.

Currency analysts at Nomura Securities believe markets are interpreting the minutes as an indication that the Fed will not take a break in the tightening cycle.

"Hence, depending on the incoming data, all meetings for the foreseeable future are likely to deliver 25 basis point rate hikes."

Higher U.S. rates could draw more foreign capital to U.S. markets, a prospect that pushed the euro to as low as $1.3213 earlier. One euro was worth $1.3294 in recent trade.

The dollar gained initially against the Japanese yen, but had since turned negative. One dollar was worth 103.83 yen, a loss of 0.7 percent compared to where it stood in late U.S. trading Tuesday.

Currency traders said the inability of the dollar to extend its gains after an upbeat reading for a U.S. measure of the services economy could mean the dollar's three-day rally had gone too far without a pullback.

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