Euro Rises Against Dollar as Report May Show Faster Inflation

By Stanley White

July 31 (Bloomberg) -- The euro rose against the dollar, snapping two days of losses, before data that may show regional inflation accelerated to a 16-year high.

The euro also advanced versus the British pound on speculation the consumer price data will increase pressure on the European Central Bank to raise interest rates. A report showing U.K. consumer confidence slumped to a record low contributed to the drop in sterling.

``ECB officials remain hawkish even though the European economy is slowing,'' said Satoru Ogasawara, an economist at Credit Suisse Group in Tokyo. ``Provided economic figures continue to be not so bad, strong inflation figures will reignite expectations of a rate hike by the ECB.''

The euro rose to $1.5632 per euro as of 8:16 a.m. in London from $1.5576 late yesterday in New York. The U.S. currency was at 107.89 yen after reaching 108.33 yesterday, the highest since June 25. The yen was quoted at 168.63 per euro from 168.41. The euro may rise to $1.65 against the dollar in three months, Ogasawara said.

Against the euro, the pound declined to 78.83 pence from 78.59. GfK NOP's index of consumer confidence fell to minus 39 in July, the lowest since the data began in 1974, the market research organization said today in London.

The euro zone's consumer price index rose 4.1 percent in July, the biggest increase since April 1992, according to a Bloomberg News survey. The figures are due at 11 a.m. in Luxembourg today.

The ECB, which aims to keep inflation just below 2 percent, raised its benchmark rate to 4.25 percent on July 3, the highest level since 2001. ECB council member Klaus Liebscher said on July 24 the bank has room to raise rates again even as economic growth falters.

To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.netKosuke Goto in Tokyo at kgoto2@bloomberg.net