Dollar rose considerably

Dollar rose considerably after top officials from Fed reiterated their concerns over inflation, while Treasury Secretary once again addressed dollar's exchange rate. Dollar rose to 3-month high vs yen of 107.43, while euro fell to 3-session low of 1.5453. Analysts say Fed Chairman Bernanke's comments downplaying recession risks, renewed emphasis on inflation have bolstered view rate hikes not far away. Dallas Fed president Richard Fisher added to emphasis on inflation in speech, saying central bank "can't allow inflation pressure to take hold." Adam Boyton, FX strategist at Deutsche Bank in New York, said: "The Fed has made it fairly clear that it has shifted its focus to inflation, rather than growth." Joseph Trevisani, chief market analyst at FX Solutions Saddle River, N.J, said "dollar is going to be stable or stronger in the next few months." Late in New York EUR/USD was at 1.5459 vs 1.5627 late Monday, USD/JPY 107.31, vs 106.29, GBP/USD 1.9538 vs 1.9726, USD/CHF 1.0419 vs 1.0286, EUR/USD 165.88 vs 166.10. Stocks stablized but failed to gain traction because of inflation fears; Coca-Cola Co. rose 3.9% after Deutsche Bank raised its rating, which helped Dow stay in positive territory; Lehman Brothers fell 6.7%; Dow +0.08%, Nasdaq down 0.4%, Philly semicons down 1.5%. Hawkish fed hammmered Treasurys, with 2-year paper taking severe beating; market now pricing in rate hike in coming months; 2-year yield +18.9 bp at 2.90%, 10-year +11.3 bp at 4.11%. Nymex July crude retreated for 2nd straight day, down $3.04 at $131.31/bbl, hurt by stronger USD and new indications of faltering demand. Comex August gold shed $26.90 to $871.20/oz on higher USD, lower oil.

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