New York: The dollar fell against the euro Monday as Federal Reserve officials` comments raised questions about the timing of the central bank`s plan to raise its key interest rate this year.
After last Friday`s solid US jobs report for July, many analysts saw support for the Fed to raise its zero-level benchmark federal funds rate in September. Others said the Fed would probably wait until later in the year, or even until 2016, to make the first lift-off since May 2006.
"Gains for the dollar have proven tougher to hold on to these days, a reflection of the still uncertain climate for Fed policy and how higher borrowing rates have largely been baked into its value," said Joe Manimbo, senior market analyst at Western Union Business Solutions.
The Fed began the tightening cycle in September 2007, finally bringing the fed funds rate to essentially zero in late 2008 to help support the economy`s recovery from the Great Recession.
While the job market has improved to near full-employment levels, inflation has remained tepid, well below the Fed`s 2.0 percent target, and the economy has achieved only a slow recovery, making the decision to tighten credit without derailing growth a tough call.
Fed Vice Chairman Stanley Fischer said Monday that low inflation remains a concern, although the Fed thinks it is due to transitory factors such as lower oil prices.
"Employment has been rising pretty fast relative to previous performance, and yet inflation is very low," Fischer told Bloomberg Television. "And the concern about this situation is not to move before we see inflation, as well as employment, returning to more normal levels."
Atlanta Fed President Dennis Lockhart appeared to raise the prospect for a hike sooner rather than later.
"We are getting closer and closer to what feels like a healed state of the economy," Lockhart said in prepared remarks to the Atlanta Press Club.
"I think the point of liftoff is close."
2100 GMT Monday Friday
EUR/USD 1.1019 1.0962
EUR/JPY 137.31 136.16
EUR/CHF 1.0839 1.0786
EUR/GBP 0.7068 0.7076
USD/JPY 124.72 124.22
USD/CHF 0.9837 0.9840
GBP/USD 1.5590 1.5492
