UPDATES ON AUG 5 2008

AUG 5 TUESDAY

Dollar Rises Against Euro on Fed Rate Outlook, Oil Decline .

The dollar rose, approaching a six- week high against the euro,

before a Federal Reserve decision today at which policy

makers may leave interest rates on hold and highlight

concerns about inflation.

The U.S. currency also traded near a seven-week peak versus

the yen after crude oil fell to a 13-week low, helping the world's

largest consumer of the fuel sustain economic growth.

Australia's dollar dropped to a three-month low after

the nation's central bank signaled borrowing costs

may be cut.

The dollar rose to $1.5528 per euro at 1:55 p.m. in Tokyo from

$1.5576 yesterday in New York. It touched $1.5515 on Aug. 1,

the strongest level since June 24. It was at 108.19 yen from

108.27 yen in New York yesterday. It touched a four-month

high of 108.58 yen on June 16.

The dollar advanced against the euro after the U.S. Commerce

Department yesterday reported consumer inflation accelerated

to 0.8 percent in June, the fastest pace since September 2005.

Also supporting the greenback, crude oil fell below $120 a barrel

for the first time since May. The euro-dollar exchange rate and

oil have had a correlation of 0.9 in the past year, according to

Bloomberg calculations. A reading of 1 would mean they

moved in lockstep.

The Fed will keep its target rate for overnight loans between

banks at 2 percent today, according to the median forecast

of economists in a separate Bloomberg News survey. The

decision will be announced at 2:15 p.m. in Washington.

Futures on the Chicago Board of Trade showed a 32 percent

chance yesterday the Fed will raise its 2 percent target rate

for overnight lending between banks by at least a quarter

point at the Federal Open Market Committee meeting on

Sept. 16, compared with 38 percent a week earlier.

The contracts showed a 65 percent chance the Fed

will increase the rate by December, almost the same

odds as a week earlier.