(Recasts, updates prices, adds comment, changes byline,
changes dateline, previous LONDON).
* Dollar falls against euro and yen as session opens
* ECB's Stark reins in extent of ECB rate hike
expectations
* Euro declines short lived as investors debate ECB
outlook
NEW YORK, June 11 (Reuters) - The dollar fell against the
euro and yen on Wednesday with investors debating the relative
outlook for interest rates in the United States and Europe
given the rhetoric of various central bank officials in recent
days.
Investors expect a euro-zone rate hike as soon as July
based on comments from European Central Bank President
Jean-Claude Trichet last week.
Central bank officials in the past few weeks have cranked
up their discussion of rate outlooks, with the Fed also saying
it will fight inflation pressures even amid concerns about
slowing economic growth.
Analysts say the combination of surging prices and
struggling economies is making it difficult for markets to
gauge the outlook for interest rates and trading could be
volatile based on officials' comments in the near term.
The euro did touch a session low against the dollar after
European Central Bank board member Jeurgen Stark was reported
as saying the central bank is not considering a series of rate
rises. For details, see [].
The euro then recovered as buyers debated Stark's comments
against those made by other ECB officials in recent days.
"Looking in to the remarks, Stark went on to say that the
markets understood the ECB's signal for July, which suggests
that July will see a rate hike, but may be the only one in the
current cycle," said Ron Simpson, director of currency research
at Action Economics in Tampa, Florida.
The euro traded 0.3 percent higher at $1.5500 <EUR=> in
early New York trade, recovering from the slide to a session
low of $1.5454 after Stark told Bloomberg News that the ECB
will do everything necessary to anchor inflation expectations.
RATE RHETORIC
Stark's comments came after ECB President Jean-Claude
Trichet surprised markets last week when he signaled that a
rate increase could come as soon as next month to limit the
inflationary impact on the economy from soaring oil prices.
Traders took Stark's comments to be softer in tone than
those of Dallas Fed President Richard Fisher, who on Tuesday
said the U.S. central bank would not allow inflation
expectations to rise unchecked, echoing comments made by Fed
Chairman Ben Bernanke a day earlier. []
Such hawkishness pushed the dollar up to 107.75 yen <JPY=>,
based on Reuters data in early trading in the global session,
its highest level since late February, before it retreated to
107.30. The dollar gave back gains as investors debated whether
the 2.4 percent gain in the dollar in the previous two sessions
was too far, too fast.
The euro remained 0.1 percent higher at 166.34 yen
<EURJPY=>.
Bernanke had said the risk the U.S. economy has entered a
substantial downturn has diminished over the past month,
sparking the interest rate futures market to price in as much
as 75 basis points of rate hikes by the end of the year
<FEDWATCH>.
Strong warnings about inflation risks from Fed officials
came alongside an unexpected barrage of remarks from the U.S.
Treasury, which has said it is keeping an eye on the dollar and
keeping options open for dollar-buying intervention to stem its
slide.
Some analysts said they were surprised by the slew of
comments from financial officials in the run-up to the Group of
Eight finance ministers meeting later in the week, adding they
would be watching to see if currencies will be discussed at the
gathering.
Japan's Ministry of Finance said currencies may make it on
to the agenda when the nation hosts the meeting later this
week, while adding the issue was unlikely to be included in the
final communique []
(Additional reporting by Naomi Tajitsu)
(Reporting by Nick Olivari; Editing by Tom Hals)
