Dollar Advances to Five-Week High as U.S. Inflation Accelerates
March 23 (Bloomberg) -- The dollar rose to a five-week high against the euro after U.S. inflation accelerated, bolstering speculation the Federal Reserve will abandon its policy of gradual increases in interest rates.

The dollar is up 4 percent this year as the pace of economic expansion in the U.S. is poised to exceed the euro region for the fourth consecutive year and the Fed raises its target rate. The Fed, which has lifted its rate seven times since June in quarter point steps, said yesterday inflation pressures are picking up.

``The dollar is benefiting from the perception that interest rates are going to move higher, faster,'' said Grant Wilson, a currency trader in Pittsburgh at Mellon Financial Corp., which manages about $700 billion in assets. ``This justifies the statement that came out of the Fed.''

Against the euro, the dollar rose to $1.3033 at 9:26 a.m. in New York from $1.3087 late yesterday, according to electronic foreign-exchange trading system EBS. Earlier it reached $1.2984, the highest since Feb. 16. The dollar's advance today began after the Ifo institute said German business confidence unexpectedly declined in March.

``This isn't good news for the euro,'' said Mitul Kotecha, global head of currency strategy in London at Calyon, the securities unit of Credit Agricole SA. ``It's a very contrasting picture between the U.S. and Europe on growth and the U.S. wins outright.''