Nervous Forex Market Awaits Fed - TheStreet

The dollar traded in a narrow range overnight ahead of today's interest-rate announcement from the Fed, due around 2.15 p.m. The market expects no interest rate increase and so will focus on the accompanying statement that may indicate the likelihood of further rises.

"The Fed is naturally the story," said Cameron Crise of

SBC Warburg

in London. "The Fed doesn't normally spring surprises, but if they were genuinely worried about inflation, they'd go 25 basis-points," he said.

This morning the Census Bureau announced that U.S. durable goods orders for May rose 6.0% after a revised decline of 5.7% in April.

The

Bank of Japan's

policy board voted overnight to keep the zero interest rate policy in tact for the coming month. The decision had been expected.

The topic of a possible downgrading of Japan's international credit rating by

Fitch IBCA

continues to cause concern in the forex market. "We are caught in the cross fire between the downgrade, possible intervention and an interest rate rise, " Crise said.

Dollar/yen is opening little changed at 105.70.

French business confidence remains at record highs, according to the latest report from

INSEE

, the national statistics office. French economic growth is forecast to reach 3.7% this year and 3.5% in 2001.

European Central Bank

chief economist,

Otmar Issing

, said today that the bank would take" appropriate action" if weakness in the euro was seen as raising zone inflation.

The ECB reported that the euro zone current account for April has a deficit of 3.2 billion euros compared with a surplus of 4.8 billion euros in April 1999.

The euro eased overnight and is opening at $0.9405.

In terms of the yen, the euro is opening lower this morning at 99.40.

After some relatively aggressive moves yesterday, the pound is exhibiting more stability and is only moderately softer at $1.5040. In sterling terms, the euro is weaker at 62.50 pence.

The Labor government's

Trade and Industry

minister,

Helen Liddell

, gave a surprisingly strong interview to a German newspaper, saying that Britain could join the euro zone sooner than expected. "We are trying to make Britain fit for the euro. The reason it is taking time is due to the previous government," she said. "There are no longer any reservations in principle against the euro," she said.

Dollar/Swiss franc gained one centime overnight and is opening at 1.6460. The euro has moved little versus the Swiss franc, and the cross is opening at 1.5480.

U.S. dollar/Canada is still mired in a trading range and is opening virtually unchanged at C$1.4815.

The Australian dollar is steady at $0.6005. The New Zealand dollar is a little weaker at $0.4685. The Aussie dollar is expected to stay around current levels if the Fed leaves U.S. rates unchanged.

The South African rand is again looking firm and is opening at 6.78 with optimism coming from indications of increased stability in Zimbabwe.

The Mexican peso remains soft and is opening the day at 10.03, only slightly better than yesterday's 16 month lows.

The Polish zloty is opening steady, at 4.40 per dollar.