(Adds details, updates prices, changes byline)
*Dollar rallies broadly
*U.S. durable goods orders fall less than expected
*Inflation accelerates in Germany
NEW YORK, May 28 (Reuters) - The dollar rose broadly on
Wednesday as a better-than-expected report on U.S. durable
goods orders for April bolstered the view the Federal Reserve
may keep interest rates on hold or even raise them by
year-end.
Demand for the greenback also rose after reports showed
rising German inflation and oil prices eased from recent record
highs.
New orders for long-lasting U.S. goods fell 0.5 percent
last month, lower than the 1 percent drop expected by analysts
in a Reuters poll. Stripping out transportation, orders rose
2.5 percent, the biggest gain since July, the Commerce
Department said. For details, see []
"It's another instance of a negative number, but one that's
better than expectations, and that's probably going to end up
helping the dollar," said Shaun Osborne, a senior currency
strategist, at TD Securities, in Toronto.
U.S. short-term interest rate futures show that investors
widely expect the Federal Reserve to raise interest rates by a
quarter percentage point to 2.25 percent by year-end.
"These numbers bode well for those looking to the Fed to
possibly raise rates toward the end of this year and will
likely support the dollar throughout the session," said Omer
Esiner, a currency analyst at Ruesch International in
Washington.
In late trading in New York, the euro was last down 0.2
percent at $1.5646 <EUR=>. The dollar also rallied 0.3 percent
against a basket of six currencies to trade at 72.547 <.DXY>.
The dollar earlier traded at a two-week high against the
yen at 105.32, but it pared some of its gains and was last up
0.4 percent at 104.68 <JPY=>.
"People are still inclined to buy the dollar after we broke
above 104.90 resistance in dollar-yen and below euro-dollar
short-term support around 1.5640," Osborne added.
INFLATION FEARS
In Germany, annual inflation in three states topped 3
percent in May, highlighting upside risks to the reading for
the euro zone's biggest economy, due later on Wednesday.
The data supported expectations for the European Central
Bank to retain its hawkish, inflation-fighting stance despite
signs of an economic slowdown seen in recent sentiment surveys
from euro zone member states.
Other data in Europe showed the outflow of investment from
the euro zone accelerated in March.
Analysts said the euro may still rebound to recent
one-month highs even after weak data as the ECB's policy stance
is seen unchanged.
"We had sentiment data from Europe yesterday which were
weak, so of course we get people nervous about second quarter
activity, and then we get CPI numbers today underlining the
fact that Europe has an inflation issue -- so that muddies the
water," said Calyon senior currency strategist Daragh Maher.
Oil prices traded well below last week's record at $135.09
a barrel. Surging oil prices have fanned fears about the
ability of U.S. consumers and businesses to weather the credit-
and housing market-led downturn.
(Additional reporting by Steven C. Johnson in New York and
Veronica Brown in London)
(Reporting by Nick Olivari and Vivianne Rodrigues; editing by
Gary Crosse)
