Dollar stable as dealers eye G8, Iran
The dollar eased against the euro but firmed against the yen Wednesday as dealers digested news that Iran had test-fired a long-range missile and world leaders wrapped up a key summit in Japan.
The European single currency rose to 1.5670 dollars in early London trade on Wednesday, from 1.5664 dollars late on Tuesday.
Against the yen, the dollar edged up to 107.55 yen from 107.50.
The G8 powers wrapped up summit talks on the global economy Wednesday with fresh warnings about the threat from soaring commodity costs but no quick fixes for jittery markets.
"The end of the G8 meeting in Japan today (Wednesday), without anything further on the dollar, has coincided with a missile test from Iran, which have prompted some renewed dollar selling against most other currencies," said Derek Halpenny, economist at The Bank of Tokyo-Mitsubishi UFJ in London.
Iran on Wednesday test-fired its Shahab-3 missile, whose longer range puts Israel within reach, amid growing fears that the standoff over the contested Iranian nuclear drive could lead to war.
The Shahab-3 was among a broadside of nine missiles fired off in the early morning from an undisclosed location in the Iranian desert, state-run Arabic channel Al-Alam and its English counterpart Press-TV reported.
At the G8 summit in Japan, the world's eight richest nations made no mention of the ailing US currency in their joint statements, although French President Nicolas Sarkozy said the leaders were united in their belief that a weak dollar was bad for the global economy.
"There is now clearly a converging view of the economic damage that can be caused by currency imbalances ... a dollar that is too low, a yuan that is too low and a euro that is too high," he told reporters.
Traders see little immediate prospect of coordinated market intervention by the G8 to prop up the greenback as European nations may be reluctant to see their own currencies fall too much because that could stoke inflation.
ECB President Jean-Claude Trichet meanwhile warned Wednesday that eurozone inflation was at the "worrying" level of 4.0 percent in June -- and risked staying high in the months ahead.
"In the wake of renewed sharp commodities price increases, (inflation) arrived at the worrying levels of around 4.0 percent in mid 2008," Trichet told the European Parliament in Strasbourg.
"Looking ahead, the annual (inflation) rate is likely to remain well above the levels consistent with price stability for sometime, moderating only gradually in 2009.
"Risks to price stability over the medium term remain clearly on the upside ... and have intensified in recent months," he added.
The ECB raised its main interest rate last Thursday by a quarter percentage point to 4.25 percent despite eurozone's weakening economic outlook as it sought to dampen inflation.
Eurozone countries grew 0.7 percent in the first three months of 2008, the EU's Eurostat data agency said Wednesday, trimming back a previous estimate of 0.8 percent.
In London trading on Wednesday morning, the euro changed hands at 1.5670 dollars against 1.5664 late on Tuesday, at 168.59 yen (168.40), 0.7961 pounds (0.7953) and 1.6203 Swiss francs (1.6193).
The dollar stood at 107.55 yen (107.50) and 1.0335 Swiss francs (1.0335).
The pound was at 1.9690 dollars (1.9693).
On the London Bullion Market, the price of gold rose to 923.46 dollars per ounce from 921 dollars late on Tuesday.
AFP
