Friday February 8, 2008 - 21:52:19 GMT
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Reuters - www.reuters.com
FOREX NEWS - Dollar set for biggest weekly rise since June 2006
(Updates prices, adds byline)
By Kevin Plumberg
NEW YORK, Feb 8 (Reuters) - The dollar slipped on Friday on
light profit-taking but was still on track for the biggest
weekly rise since June 2006 as investors increasingly expect
the U.S. growth slowdown to drag on other economies.
The euro was off 3 cents in the week against the dollar and
was seen weakening more in coming days on growing expectations
the European Central Bank will cut interest rates later this
year, even with persistent inflation pressures.
"Despite a torrent of bad economic news the dollar has been
on a tear this week, as the currency market recognized the fact
that the slowdown in U.S. economic activity is likely to drag
down growth in the rest of the G10 universe, forcing other
central banks to adopt a much more accommodative monetary
policy," said Boris Schlossberg, chief currency strategist with
DailyFX.com in New York.
The euro edged up 0.2 percent on the day to $1.4505 <EUR=>,
but was down 2 percent on the week, the largest weekly decline
in one and a half years.
The dollar was down 0.2 percent at 107.32 yen <JPY=>.
For the week, the New York Board of Trade's U.S. dollar
index was up 1.6 percent to 76.652 .DXY.
The euro had jumped to a session high after a report said
that OPEC may adopt the euro and abandon the dollar when
pricing oil. Those gains, However, were short lived.
"If it happens, it's huge." said Joe Manimbo, a
currency trader at Ruesch International in Washington, D.C.
"Trade is thin ahead of G7 and those headlines really hit."
Finance ministers and central bank heads at the Group of
Seven rich nations will meet on Saturday.
SLOWDOWN SPREADS TO EUROPE
The ECB kept its key interest rate at 4 percent on
Thursday, but the bank's president, Jean-Claude Trichet,
dropped a threat to act preemptively against rising prices and
accepted that unusually high uncertainty in markets may hurt
the euro zone economy.
"It became clear this week that the economic slowdown has
been moving East and that Europe is not insulated," said Mark
Meadows at Tempus Consulting in Washington, D.C. "The euro
suddenly came under pressure and it may continue so for a
Although the euro is now about 5 cents -- or 3 percent --
below last November's record high versus the dollar, it is
still more than 10 percent higher than a year ago. On the ECB's
trade-weighted basis, it is holding just below all-time peaks
set in January <EUREER=ECBF>.
Trade was relatively quiet, with many Asian players away
for the Lunar New Year break. Financial markets in Tokyo will
be closed on Monday for a national holiday.
Sterling was up 0.1 percent versus the dollar at $1.9455
<GBP=>, recovering some of Thursday's losses sustained after
the Bank of England cut rates by 25 basis points to 5.25
percent and signaled it would likely stick with a path of
gradual monetary easing.
The Canadian dollar was one of the biggest movers on the
day, after strong Canadian employment data. The U.S. dollar
fell 1 percent to C$0.9992 <CAD=>.
Still, positive views on the dollar were easier to find
despite fears of a recession.
"We continue to favor the dollar this year," Mansoor
Mohi-uddin, a currency strategist at UBS, said in a note. "Risk
aversion will deter U.S. investors from buying overseas assets,
and interest rate cuts in the rest of the world will ease the
dollar's cyclical undervaluation,"
(Additional reporting by Vivianne Rodrigues; editing by Leslie
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