Dollar enjoys weekly gain as Fed signals inflation risks

NEW YORK: The dollar gained this week against the euro and yen after Federal Reserve officials signalled concern inflation remains a risk. Dallas Fed Bank President Richard Fisher said on Friday policy makers have "no tolerance??™??™ for inflation above 2%.

Fed Bank of St Louis President William Poole said on Thursday the US is not "out of the woods??™??™ on inflation. The dollar trimmed some of its weekly advance after a US report on Friday showed housing starts tumbled to a six-year low.

"The Fed is keeping an eye on inflation,??™??™ said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc in Greenwich, Connecticut. "A rate cut is still a long way off.??™??™

The dollar strengthened 0.1% this week versus the euro and yen. It increased to $1.2829 per euro in New York on Friday from $1.2841 a week earlier. The US currency rose to ??117.75 on from ??117.62 on November 10.

Higher interest rates boost the allure of dollar-denominated assets. The Fed has kept its overnight interest rate on loans between banks at 5.25% since August, after lifting borrowing costs 17 consecutive times over two years.

A price gauge tied to US consumer spending patterns excluding food and energy costs, the Fed??™s preferred measure of inflation, rose 2.4% in September on a year-over-year basis after a 2.5% increase a month earlier, the Commerce Department said on October 30.

Fed Chairman Ben S Bernanke is among policy makers who have said they would be comfortable with a 1% to 2% increase in the measure over a 12-month period.

"Most members judged that the downside risks to economic activity had diminished a little,??™??™ the Fed said in minutes of its gathering on October 24-25 released in Washington on November 15. "All members agreed that the risks to achieving the anticipated reduction in inflation remained the greatest concern.??™??™ ??“ Bloomberg