haha.
by the way. the bloomberg explanation. I don't buy it. If the fed were 'strong dollar', they would have raised the rates. They realize all they really can more easily control, in terms of inflation, is the housing market and its related economies. If they can support the housing market, they do it to save the economy at the expense of the dollar. That is fed policy.
If they are attempting to control commodity based inflation, they would be raising rates .50 per session until we're deep in recession and energy demand slows to a crawl. They clearly are not.
Dollar Climbs After Federal Reserve Says May Raise Rates Again
Aug. 9 (Bloomberg) -- The dollar gained as the U.S. Federal Reserve said it may raise interest rates again after yesterday keeping them on hold for the first time in two years.
The Fed left room for further increases by saying inflation has been ``elevated'' and remains a risk. Its benchmark overnight lending rate for banks of 5.25 percent is still 2.25 percentage points higher than borrowing costs in Europe and 5 points above those in Japan, helping maintain demand for the higher returns available on dollar-denominated financial assets.
``The Fed suggested additional possible rate hikes,'' Yuji Saito, a senior currency dealer at Societe Generale SA, said in Tokyo. ``For investors who believed the Fed was done, this is a big surprise. They're now scrambling to buy back the dollar.''
The currency traded at $1.2776 against the euro as of 9:32 a.m. in Tokyo from $1.2833 late in New York yesterday. It bought 115.66 yen from 115.31.
Gains accelerated after the dollar broke through $1.28 to the euro and 115.60 yen levels, where traders had orders to buy the currency, Saito said. The dollar may rise to $1.27 versus the euro and 116 yen today, he forecast. Traders sometimes place automatic orders to limit losses in case bets go the wrong way.
U.S. interest-rate futures show traders are pricing in a 53 percent chance the Fed will push key rates to 5.5 percent by year-end, up from 50 percent on Aug. 4.
``Some inflation risks remain,'' the Fed's statement said. ``The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth.''
`Weather The Storm'
Policy makers' decision to keep key rates on hold at their highest level since March 2001 may reduce some traders' concerns the Fed had damaged the economy with 17 straight increases.
Gross domestic product last quarter slowed by more than a half to a 2.5 percent annual rate.
``People are now dollar positive because they believe the Fed is doing the right thing for the U.S. economy,'' Darren Heathcote, head of trading at Investec Australia, said in Sydney. ``The economy looks as if it will now weather the storm and this will support the currency.''
The dollar will trade between $1.2550 and $1.30 per euro and 113 to 118 yen in the next month, he forecast.
Financial markets in Singapore are closed for a public holiday today, with trading expected to be ``60 percent to 70 percent'' of a usual day in Asia, said Kotaro Kunimochi, director of the currency team in Tokyo at Barclays Plc.
