TRADING volumes in the currency markets were quiet with many US banks
shut for the Martin Luther King holiday. However, underling trends
remained unchanged, with the dollar continuing to be negatively affected
by the growing perception that the US Federal Reserve will not now raise
US interest rates at the end of the month.
If US rates do not rise then the dollar could lose up to 5% of its
value as investors desert the currency. Today's publication of US
industrial production and capacity utilisation data will give a clue as
to the likely course of US interest rates.
Elsewhere, after a period of weakness, the Italian lira recovered some
composure in the wake of Treasury Minister Lamberto Dini's appointment
as Prime Minister-designate.Sterling ignored December UK producer prices
data and had a mixed tone. It dropped 0.29 to DM2.4014, but it was a
quarter cent better than the dollar at 1.5700.
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