The dollar rose yesterday against a basket of six major currencies after Wednesday's US durable goods data came in less weak than expected, giving some respite to investors worried about US economic health.
The euro lost ground after figures showed the first rise in Germany's seasonally adjusted jobless total in over two years.
US durable goods orders fell by a smaller-than-expected 0.5 per cent last month and bolstered the view that the US central bank may leave its aggressive monetary easing campaign behind it for now after slashing borrowing costs to two per cent.
But inflationary concerns were not far from policy-makers' minds. Dallas Fed President Richard Fisher said on Wednesday that the US central bank would likely up interest rates "sooner rather than later" if inflation worsens, even if the economy remains weak.
While the comments proved dollar-supportive on the surface, analysts were wary on how sustainable dollar resilience was in light of a potentially toxic mix of rising inflation and low growth. "A hawkish Fed, or a more hawkish Fed, does not necessarily mean a stronger dollar in our view – given the fact that the growth outlook still remains uncertain, consumer confidence is very weak and oil is high," said Phyllis Papadavid, currency strategist at SocGen. "The Fed is stuck between a rock and a hard place and their hawkishness is not reflective of comfort on the growth outlook, it's more to do with prospects for ugly inflation." (Reuters)
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