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Forex Market Awaits Greenspan's Testimony on U.S. Economy

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The tone in the currency markets was unchanged overnight, with the dollar maintaining its moderate strength. None of today's economic events is expected to significantly change this state of affairs.

Dominating the forex market is anticipation of today's speech to Congress by

Fed Chairman

Alan Greenspan.

"I think Greenspan's speech could turn out a bit of an anti-climax," said Matthew Clements of

Prebon Yammane

in London. Clements thinks the speech will stress the inflation risks to the economy. "He's likely to be fairly bearish about the U.S. economy and to suggest that higher rates could happen."

As expected, the

European Central Bank

left euro zone interest rates unchanged at its meeting this morning.

wrote about the

interest-rate decision in a separate article. Forex prices barely moved on this non-event.

"By the end of August, I imagine they will raise by 50 basis-points, not just 25. The euro data show that oil prices have pushed up inflation in many euro zone countries," Clements said.

Treasury Secretary

Lawrence Summers

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said economic growth in the U.S. will continue. "I think the fundamentals of the U.S. economy are strong and prospects for continued expansion are very good," he told reporters in Tokyo at the

Group of Eight


The euro is still quite weak and is close to its lowest levels of yesterday at $0.9220.

Once again the issue of ongoing funds outflows from the euro zone is gaining attention.

Deutsche Telekom

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of Germany is in talks to acquire

VoiceStream Wireless



ING Groep

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of Holland is purchasing units of the

Aetna Group



Traders are concerned that mergers and acquisition transactions in which euro zone companies need dollars to buy U.S. companies will keep the euro on the defensive.

Dollar/yen continues to trade quietly around 108.15.

Euro/yen pushed below the parity level of 100 yen per euro and is opening at 99.70.

Dollar/Swiss franc matched the dollar's strength versus the euro and is back around 1.6790. The euro/Swiss franc rate is steady at 1.5485.

The pound eased down modestly against the dollar and is opening at $1.4955. Euro/sterling is steady at 61.65 pence.

The Canadian dollar has not budged overnight and is opening around C$1.4770.

The Australian dollar has ticked up to $0.5785, but remains weak. Australian manufacturing output prices rose 1.9% in the second quarter of the year and were up 7.3% year-on-year.

The New Zealand dollar is marginally firmer at $0.4575. The key issue for both the Australian and New Zealand currencies is the future track of U.S. interest rates, as well as the implications for the differential with the Aussie and Kiwi equivalents.

The South African rand weakened to 6.98.

The Polish zloty dropped lower to 4.37 per dollar following the announcement of a delay in completing the sale of a stake in the Polish telecom company



France Telecom

. The currency has since recovered after a positive tax vote in the Polish parliament. It is now around 4.35.

The Mexican peso is unchanged at 9.44.

The Indonesian rupiah continues to firm and is opening at 8,900.

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