London, May 15: The dollar surfed higher on Monday, most visibly against the yen, finding support ahead of a US Federal Reserve policy meeting on Tuesday which is widely expected to sanction a 50 basis point rise in interest rates.Analysts said the dollar's advance was more pronounced against the yen as Japanese interest rates, currently close to zero, were not expected to rise anytime soon, making the Japanese currency less attractive compared to the dollar.The sluggish performance in Japanese stocks, with the Nikkei average still mired near six-month lows set last week, was also adding pressure to the yen, dealers said. The dollar firmed as far as 109.53, coming with in 3/4 yen of two-month highs above 110 it set last week. Dollar/yen gains were keeping euro/yen propped near Monday's peaks above 100 yen.
``People are looking ahead at tomorrow's FOMC meeting,'' said Jeremy Hawkins, chief economic advisor at Bank of America in London.
``There is a general assumption that the Federal Reserve will do 50 basis points, while the Bank of Japan is expected to keep rates on hold in the foreseeable future. This adds to the attractivness of holding dollars.''Twenty-seven out of 29 top Wall Street dealers polled by Reuters on Friday expect the FOMC, the Fed's policy-making arm, to raise its 6 per cent federal funds rate target by half a percentage point. Traders said dealers would keep a close eye on any statement following the rate decision for hints on whether the Fed would hike rates again at is June policy-setting meeting.
The Australian dollar and the New Zealand dollar, currencies of countries which are not expected to keep up with the US Federal Reserve's tightening pace, were also suffering.
-- (Reuters)
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.