Dollar stable as market weighs rate hike prospects

NEW YORK, June 18, 2008 (AFP) – The dollar held steady against other major currencies Wednesday in volatile trade as investors weighed prospects of US and eurozone interest rate hikes to counter rising inflation. The single European currency was at 1.5532 dollars around 2100 GMT, up from 1.5508 dollars late Tuesday.

The dollar stood at 107.86 yen, 107.93.
The US currency lost ground earlier in the day after investors saw that a reported decline in US crude oil stockpiles last week did not trigger a sharp gain in oil prices, a move that would have heightened inflation fears.

Currency trading was generally choppy Wednesday as dealers tried to divine the next moves by the US Federal Reserve and the European Central Bank.

While earlier comments from US officials had pointed to imminent rate hikes in the face of rising inflation, more recent remarks prompted a reassessment of that possibility.

“The volatility in interest rate markets continues and central bankers are largely to blame,” said Calyon analyst Mitul Kotecha.

“There appears to be en effort underway to moderate market expectations for higher rates.”

Commerzbank analysts commented: “Aware that the European Central Bank will in a