The dollar has continued its recovery from the lows of yesterday.

Federal Reserve Bank of Richmond

president Alfred Broaddus believes that further interest rate increases in the U.S. are still needed. "In order to prevent the re-emergence of inflationary pressures and, in doing so, to sustain the expansion, U.S. monetary policy must allow short term real interest rates to rise," he said.

The yen is little changed overnight and is opening at 106.15. The

Bank of Japan

has again indicated that its "zero-interest-rate" policy is not likely to end in the near future.

The euro has continued to give ground and opened at $0.9520, half a penny below last night's close. The euro was hurt by comments from

Bundesbank

president Ernst Welteke implying that euro rates are on hold until September unless data change significantly.

German wholesale prices rose 0.8% in May, a greater-than-expected increase.

Traders are not convinced of the euro's ability to make further headway vs. the dollar. "I don't think there's much impetus towards parity and it's vulnerable on the downside but not back to the lows," said Derek Halpenny of

Bank of Tokyo Mitsubishi

.

Despite further evidence of the slowing British economy, the pound has rallied in London this morning. Dealers say that the sterling buying is tied to the acquisition of

Bass Plc

by the Belgian group,

Interbrew

. The euro fell from 64 pence to 63.2 pence as traders position themselves for this major transaction. Sterling/dollar has rallied from overnight lows of $1.4960 to opening levels in New York of $1.5070.

"There's talk of some M&A activity and the cash component of the sale coming through the market," said Derek Halpenny. Halpenny expects further interest rate increases in the U.K. as, "We are seeing slower spending but domestic demand is still strong...In the late summer things will pick up somewhat," he said.

Negative news for the pound came in the announcement of job losses at a number of major British companies. Retail sales in the U.K. in May rose only 0.2% for the last three months, providing further indication of a slowing economy.

Dollar/Swiss franc is firmer at 1.6420, after the

Swiss National Bank

raised its interest rate target as expected, by 50 basis-points.

The euro/Swiss franc cross is steady at 1.5645. The SNB confirmed that it is watching the euro/Swiss franc cross rate to determine the appropriate level for its currency.

The Canadian dollar opened weaker, at C$1.4720.

The Australian dollar opened in New York, at $0.6000.

The New Zealand dollar has lost all its recent gains to open, at $0.4685.

The South African rand is moving to better levels but is finding the going hard. Currently the rand is a little firmer, at 6.92.

The Mexican peso is unchanged, at 9.77.