Tuesday July 29, 2008 - 20:22:35 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar rallies to one-month high on oil drop, data
* Dollar index jumps to one-month high
* Oil price drops sharply, ignites U.S. stock rally
* July U.S. consumer confidence halts 6-month slide
(Recasts, updates prices, adds comments, changes byline)
By Wanfeng Zhou
NEW YORK, July 29 (Reuters) - The dollar soared to a
one-month high against a basket of currencies on Tuesday,
benefiting from a steep drop in oil prices and an unexpected
rise in U.S. consumer confidence.
Analysts said Merrill Lynch's (MER.N: Quote, Profile, Research, Stock Buzz) announcement late on
Monday of yet another write-down and capital-raising exercise
also helped support the dollar, as they raised hopes the
turning point in the yearlong credit crisis was close.
"The dollar has been picking up steam since 10 a.m. this
morning from the combination of a rally in stocks, higher
consumer confidence and dive in oil prices," said Michael
Woolfolk, senior currency strategist at The Bank of New York
Mellon in New York.
"Euro/dollar has been breaking through some interesting
levels, and if we see oil prices trading below $120 a barrel,
we might see another push through $1.5550 soon," he added.
The dollar index, which measures the the dollar's
performance against a basket of six currencies, jumped to
73.428 .DXY, its highest level in about a month, according to
It was last around 73.301, up 0.9 percent on the day.
Oil CLc1 fell more than $4 a barrel to below $121,
touching the lowest price since May, as signs of weakening
demand outweighed a disruption to Nigerian output.
A decline in oil prices tends to benefit the dollar, as it
eases some of the growth concerns.
There was more good news on the economy, with an
independent report showing consumer confidence unexpectedly
perked up in July, halting a six-month slide. For details, see
POOR EUROZONE DATA
Meanwhile, news that French consumer confidence plunged to
a record low for the seventh straight month in July kept
investors away from the euro.
The currency dropped as low as $1.5554 <EUR=>. It was last
trading at 1.5585, down 1 percent on the day.
The dollar <JPY=> rose 0.6 percent to 108.12 yen as U.S.
stocks rallied. The yen was also hurt by news that Japan's
jobless rate rose in June to a near two-year high and household
spending fell again from a year earlier.
Sterling <GBP=> fell 0.8 percent to $1.9791, weighed down
by a report showing British retail sales fell at a record
annual pace in July, while approvals for new mortgages hit a
record low last month, offering further proof that a
deteriorating housing market is battering the overall economy.
Analysts said the French, Japanese and British data was
evidence that the effects of the economic slump in the United
States were spreading to other regions.
"The dollar's move represents a realignment of
expectations," Kathy Lien, chief strategist at DailyFX.com,
said in a research note.
"The weakness of the U.S. economy has already been priced
into the market, but the deterioration in places like the euro
zone, New Zealand and the UK is catching many traders by
surprise, triggering weakness for the euro, New Zealand dollar
and British pound," Lien said.
Second-quarter U.S. GDP on Thursday and Friday's U.S.
non-farm payrolls figures for July will be the market's main
focuses later this week.
(Additional reporting by Lucia Mutikani and Vivianne
Rodrigues; Editing by Jonathan Oatis)
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