Dollar Off The Ropes For Now

February 2005 | Currency Forecast

Despite a good start to the year for the dollar, the EUR/US$ exchange rate has failed to break through the key US$1.2900/EUR level. In fact, the dollar hardly reacted to the latest 25bps increase in Fed funds, which takes the rate to 2.50%. Instead, the market is focusing on the upcoming G7 meeting, at which pressure will intensify on the Chinese authorities to alter the yuan peg to the dollar. That said, the prospect of higher interest rates in the US continues to underpin the dollar. Any break of US$1.2900/EUR would suggest a move towards US$1.2400/EUR.

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