Foreign Currency Report 19 April 06

GBP
Sterling hit a 2-1/2 month high against the dollar yesterday, extending Monday's gains as the US currency came under broad pressure due to expectations that U.S. interest rates might be close to a peak.
The pound was slightly down against the euro, with focus on the minutes of the Bank of England's April meeting where policymakers are expected to have voted 7-1 to leave interest rates steady at 4.5 percent.(There are normally 9 members of the MPC, but due to one member having a conflict of interest with another role, there were only 8 for this decision). The minutes are due out at 0930GMT.

USD
The dollar weakened yesterday after traders interpreted the minutes of last month's Federal Open Market Committee meeting as signalling that only one more rise in short-term interest rates was likely. Most FOMC members felt the end of the cycle of rate rises was 'near', according to the minutes of the first meeting chaired by Ben Bernanke.
The Fed has hiked rates for 15 straight meetings, bringing rates back to 4.75 percent after hitting a low of 1.0 percent in the spring of 2004.

At the same time, weaker-than-expected housing data, a tame reading of US core wholesale inflation, and dovish comments from San Francisco Fed President Janet Yellen also weighed on the greenback.

NZD
The kiwi dollar looks to strengthen due to consumer price figures. Expected to rise 3.4 percent annually, the report may lend to speculation of the need for further rate hikes. Should the report rise above 3 percent, it would be above the current 1-3 percent band earlier established by the Reserve Bank of New Zealand.

CAD
The Canadian dollar shrugged off weak car production figures. Bolstering the CAD looks to be the May crude oil contract. Notably, further upward pushes seem likely as the current level of crude doesn't' seem to be adversely affecting production for the world's largest economy.

ZAR
The rand was on the front foot in early trade today, having broken below the 6.00 per dollar level overnight, fuelled by a rampant gold price and continued weakness in the greenback. Gold was quoted at $623.30 a troy ounce from a previous $621.15/oz
The rand had taken its cue from the euro, which surged against the dollar on the view that US rates might be reaching the top of the cycle. Gold, which continued to break fresh quarter-century highs, was also providing support.