By Rika Otsuka
TOKYO, May 21 (Reuters) - The dollar hit a one-month low
against a basket of currencies on Wednesday after comments from a
German government official stoked expectations of higher euro
zone interest rates.
The U.S. currency was also dented against the yen as a fall
in Asian stocks prompted investors to unwind risky carry trades,
in which the low-yielding yen is used to finance purchases of
assets giving higher returns elsewhere.
The dollar was also hurt by crude oil's rise to record highs
near $130 a barrel <CLc1> and a surge in gold <XAU=> as investors
are concerned about the U.S. economy, which is facing weak growth
and quickening inflation.
Investors are now awaiting Germany's Ifo index of business
sentiment for May due later in the day for more clues on whether
the euro will extend its gains.
"Better-than-expected Ifo data is likely to boost the euro
further," said Minoru Shioiri, chief manager of forex trading at
Mitsubishi UFJ Securities.
"If the euro manages to climb steadily above $1.57, the
European single currency will be set to rise towards its all-time
high against the dollar," Shioiri said.
The dollar index hit fresh one-month lows near 72.30 before
recovering to 72.36 <.DXY>, still down 0.1 percent on the day.
The euro rose to $1.5665 <EUR=>, up 0.1 percent from late
U.S. trading on Tuesday. It hit all-time highs above $1.60 in
April.
Wolfgang Franz, the president of Germany's ZEW economic
research institute and a member of the government's panel of
economic advisers, said on Tuesday that he thought the European
Central Bank would lift rates soon. The institute's survey on
investors' sentiment, however, unexpectedly worsened in April.
[]
The ECB has held interest rates at 4 percent since last June,
with the market pricing in a rate rise by the end of this year.
The dollar fell 0.4 percent against the yen to 103.20 yen
<JPY=>.
The euro slipped 0.3 percent against the Japanese currency to
161.65 yen <EURJPY=R> as investors trimmed yen carry trades.
The Australian dollar rose 0.1 percent to $0.9598 <AUD=D4>,
just below a 24-year high of $0.9619 hit on Tuesday, when the
minutes of the Reserve Bank of Australia's meeting in May showed
it actively considered raising rates as inflation was
uncomfortably high.
Investors will take a careful look at the minutes of the
Federal Reserve's policy meeting on April 29-30 due at 1800 GMT
for hints on Fed officials' views on inflation risks and the
outlook for the economy.
"Further dollar selling is expected if the minutes give an
impression that the Fed is more concerned about economic growth
than inflation, pushing back expectations for a U.S. rate hike,"
said Tsutomu Soma, senior manager of foreign assets at Okasan
Securities.
The Fed has slashed rates by 3.25 percentage points to 2
percent since last September as a crisis in the housing and
credit markets slowed the economy.
Many investors expect the Fed to pause lowering rates and
start raising them later in the year.
Data on Tuesday showed that U.S. producer prices excluding
energy and food rose at their fastest pace since 1991 in the year
to April, highlighting inflation concerns that may limit the
Fed's options for supporting a weak economy. []
(Editing by Brent Kininmont)
