Sunday, March 19, 2006

Dollar Extends Sell-off by Ashraf Laidi

The dollar damage took a turn to the worse as the currency broke below the 116 yen mark while hitting the 1.22 figure against the euro amid revisions in markets’ expectations for the Fed rate decision. Conflicting speeches from the presidents of the Atlanta and San Franciso Fed left traders mulling the outcome of the May Fed meeting after yesterday’s core CPI reduced expectations of a may hike from Interest 90% to about 75%.

The 0.7% rise in February US industrial production following January’s 0.3% drop had no market impact. Capacity utilization rose 0.4% to 81.2%, matching the highest level since September 2000. The 81.2% cap rate exceeded its 1972-2005 average, which reflects the Fed’s concerns that rising “resource utilization could spark inflation”. Nonetheless, capacity utilization rate in utilities failed to sustain a sufficient rebound from its Jan low and was down 0.2% from February of last year.


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