Dollar mixed amid rate rise speculation

The dollar was mixed against other major currencies in Asian trade on Wednesday amid growing speculation that the US Federal Reserve may hike interest rates to fight inflation, dealers said.

They said the market was looking ahead to a meeting of Group of Eight finance ministers this weekend, with signs that Washington is seeking to bolster the greenback.

The dollar edged up to 107.48 yen in Tokyo afternoon trade, compared with 107.38 in New York late Tuesday.

The euro rose to 1.5509 dollars after 1.5464 and to 166.69 yen from 166.19 yen.

The market was weighing signals from US officials in support of a strong dollar, said Hachijuni Bank forex dealer Sho Komamura.

"We believe it's just verbal intervention," he said, but added that the remarks still warranted caution.

"The dollar could rise to around 108 yen" in the near future, he said.

Federal Reserve chairman Ben Bernanke has toughened his message on inflation, adding to speculation that the US central bank may hike interest rates later this year.

US Treasury Secretary Henry Paulson this week said the sound health of the world's largest economy would be reflected in the value of the dollar, but did not rule out intervention in the currency market to shore up the greenback.

Analysts said US officials appeared to be trying to talk up the dollar's value in a bid to cool import inflation, with the chances of actual currency market intervention to buy the greenback still seen as limited.

Traders were looking ahead to the meeting of finance ministers from the G8 industrialised nations on Friday and Saturday in Osaka. But with central bank governors absent, currencies may not be a major area of focus.

They said European officials may want to avoid a sharp appreciation of the dollar against the euro in any case because it would add to inflation worries in the eurozone.

The greenback has fallen by around 15 percent against the euro and over 12 percent against the yen in the past year.

Aggressive rate cuts by the Fed in recent months to bolster economic growth have weighed on the US currency.

The dollar rose to 1.3709 Singapore dollars from 1.3669 a day earlier, to 44.45 Philippine pesos from 44.43, to 1,029.75 South Korean won from 1,024, to 33.17 Thai baht from 33.01 and to 30.37 Taiwan dollars from 30.34.

But the greenback eased to 9,320.00 Indonesian rupiah from 9,332.5.