Euro Falls as Trichet Signals One Rate Increase May Be Enough

Euro Falls as Trichet Signals One Rate Increase May Be Enough
July 3 (Bloomberg) -- The euro fell the most against the dollar in more than two months after European Central Bank President Jean-Claude Trichet signaled that he may not increase interest rates again.
The 15-nation euro also dropped against the pound as Trichet said that he has ``no bias'' or ``pre-commitment'' following the decision to raise the ECB's main refinancing rate by a quarter-percentage point to 4.25 percent.
``Trichet obviously disappointed market expectations,'' said Samarjit Shankar, director of global strategy for the foreign-exchange group in Boston at Bank of New York Mellon, the world's largest custodial bank, with about $23 trillion in assets under administration. ``He wants to start with a clean slate, and that has taken away a lot of expectations of further rate hikes.''
The euro dropped 1.2 percent to $1.5688 at 12:32 p.m. in New York, from $1.5882 yesterday. It rose to the all-time high of $1.6019 on April 22. Against the pound, the euro deceased 0.6 percent to 79.20 pence, from 79.70 pence. The dollar appreciated 0.8 percent to 106.71 yen, from 105.91. The euro fell 0.5 percent to 167.40 yen, from 168.20.
Today's interest-rate increase will help the central bank bring inflation back below 2 percent, Trichet said at a press conference in Frankfurt. Economic growth may weaken to 1.5 percent next year from 1.8 percent this year and 2.6 percent in 2007, according to ECB staff.
Trichet's comments helped counter a Labor Department report showing U.S. employers eliminated jobs in June for a sixth consecutive month.