Dollar gains on Plosser's statement

The dollar rose after Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank must increase interest rates "well before" unemployment falls to an acceptable level.

"The Fed may be getting ready to start raising ultra low rates to subdue inflation, even though aggressive rate hikes may have to wait until jobs data improve," said Kunihiko Nakaji, chief manager of foreign exchange and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo.

The dollar climbed to 91.31 yen as of 9:33 a.m. in Tokyo from 90.98 yen in New York yesterday, when it fell to 90.73 yen, the weakest since Dec. 21. The US currency was at $1.4480 per euro from $1.4486, and bought $1.6157 versus the pound from $1.6164. The yen declined to 132.16 per euro from 131.79.

With the economy growing, the Fed's target for overnight lending among banks should rise "as long as inflation is near its desired level and inflation expectations are well- anchored," Plosser said yesterday in Philadelphia.

"If we fail to do so, we run the risk of keeping real interest rates too low for too long and injecting liquidity into a growing economy at a pace that will create inflation above desirable levels later in the business cycle," Plosser said.

Source UTV