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FX round-up: Rate hike hopes boost greenback

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Date: Thursday 17 Jul 2008

LONDON (ShareCast) - The release of minutes from the Federal Reserve’s June 24-25 policy meeting put the dollar back on course Wednesday, with some policymakers arguing for a rate hike “very soon”.

Borrowing costs were held at 2% last month, but an argument is raging among members of the Federal Open Market Committee about when to start bumping up rates again.

There was also help from Fed figures revealing a 0.5% increase in industrial production during June, welcome news following decline of 0.7% and 0.2% in April and May respectively. Analysts had predicted a 0.3% increase.

Meanwhile, consumer price inflation at 1.1% last month versus forecasts for a more modest 0.8% increase also supported the greenback. Gasoline prices were largely to blame, although the core CPI, which strips out volatile food and energy costs, still rose a bigger than expected 0.3%.

Sterling fell back from 3½ month highs versus the US currency as UK unemployment claims rose at their fastest pace since December 1992 last month.

The number of people claiming jobseekers’ allowance climbed by 15,500 last month to 840,100, according the Office for National Statistics (ONS), more than the 11,000 predicted.

That makes it the fifth rise in a row and comes as May’s increase of 9,000 was revised up to 14,300.

In the three months to May, some 12,000 more people lost their jobs, sending the total number up to 1.62m. The unemployment rate stayed at 5.2%.

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