ECB Raises Rates, Dollar Doesn't Weaken

by: David Jackson

Excerpt from our One-Page Annotated News Summary:

The ECB's Wait-and-Hike Strategy (Business Week)

Summary: The European Central Bank raised its benchmark interest rate 25 basis points yesterday to 3.25%, and signalled that it will likely raise rates again by year end, probably in December. It said growth is expected to slow, but remain robust in the second half. Risks to inflation lie on the upside despite the headline rate falling below 2% in September. Volatility could increase in 2007 due to the German value added tax increase. The rate rise was widely predicted, and the ECB's remarks were slightly less hawkish than expected, leading to a modest rise in the dollar against the Euro.
Related links: Background: Full ECB Statement • Impact on other currencies: Dollar Strengthens Against the Euro As ECB Lifts Rate ( Set for Weekly Gain on Expectations Rates Will Increase (Bloomberg)Swiss Franc Falls for Third Day as ECB Raises Interest Rates (Bloomberg)Yen Weakens on Concern North Korea Plans to Test Nuclear Weapon (Bloomberg)Weaker Yen Is Supporting Japan's Economic Expansion, Ota Says (Bloomberg) • Investment Commentary: Significance of the Surprisingly Weak YenCommodity Currencies Lose Their LusterPowerShares, Deutsche Bank Team Up To Offer Investors "Bull" and "Bear" Dollar Index ETFsDollar Looks OK for Now
Potentially impacted currency ETFs: Rydex Euro Currency Trust (NYSEARCA:FXE), PowerShares DB G10 Currency Harvest Fund (NYSEARCA:DBV).

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