Dollar gains traction as Fed says it might raise interest rate

However Gains in the dollar may be limited by speculation that an industry report today will show the housing slump in the U.S is slowing the economy down

The dollar gained against the euro as the Federal Reserve Bank of Kansas City President Thomas Hoenig said ``serious'' inflation pressures may spur the central bank to raise interest rates. Some traders are looking at Hoenig's comments with interest and have decided to push the dollar up. ``This is a very hawkish tone that highlights the Fed's concern that inflation may get out of hand,'' According to Hiroshi Yoshida, a foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's sixth-largest lender. The dollar climbed to $1.5487 against the euro as of 7:33 a.m. GMT, from $1.5532 in New York yesterday, when it fell to $1.5594, the lowest level since May 1. The U.S. currency also rose to 104.97 yen from 104.77 yen. The euro fell to 162.51 yen from 162.71. The dollar may advance to $1.5420 per euro today, Yoshida forecast.

However Gains in the dollar may be limited by speculation that an industry report today will show the housing slump in the U.S is slowing the economy down. The National Association of Realtors' index of pending home resales fell by 1 percent in March after a 1.9 percent decline in February, The report is due at14:00, GMT. Moving to the UK, the British pound dropped against the dollar after Nationwide Building Society said an industry survey today showed U.K. consumer confidence fell in April to the lowest in at least four years to 70 from an expected 74 and previous 77 after surveying 1,000 people. The industrial Production also fell to-0.5 from an expected -0.1. The GBP/USD is currently trading at $1.9590. The pound also fell against the Euro, the UK currency has currently weakened to £0.7911 as of 8:42, GMT.