Wednesday July 30, 2008 - 12:01:35 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr steadies near 1-mth highs, U.S. ADP data eyed
* Dollar index flat at 73.241 .DXY
* Euro zone sentiment weakens; U.S. employment data eyed
* Dlr still near 1-month high vs euro; oil, data supports
* Kiwi hits 10-month low, RBNZ chief sees room for more cuts
(Changes byline, adds quotes, update prices)
By Veronica Brown
LONDON, July 30 (Reuters) - The dollar held near one-month
highs against a basket of currencies and the yen on Wednesday,
aided by rallying share prices and a drop in oil, but nagging
worries about the U.S. financial sector capped sentiment.
Euro momentum was undermined after sentiment data for the
single currency zone came in much weaker than expected,
providing further evidence of rapidly deteriorating economic
U.S. stocks rose more than 2 percent on Tuesday after
Merrill Lynch's (MER.N: Quote, Profile, Research, Stock Buzz) latest writedown and share sale
suggested, for some, a possible turning point in the credit
crisis -- sending the dollar to a one-month high against a
basket of currencies.
European shares followed suit, rising on Wednesday .
A dip in oil prices to their lowest in nearly three months
CLc1 boosted dollar sentiment further, as worries on oil's
inflationary effect receded slightly, along with an unexpected
rise in U.S. consumer confidence.
But the dollar's recent upside progress was seen as
vulnerable as on closer inspection U.S. consumer confidence
barely climbed from its lowest levels in more than a decade
while home prices continued their record decline in May.
"We haven't been able to garner much additional traction on
the dollar as there are still ongoing issues with the financial
sector in the U.S. which are overhanging the market to a
degree," Rabobank markets strategist Jeremy Stretch said.
"Realistically there is a risk that euro/dollar goes lower
but I think the break out of the ranges is still probably going
to be a post-holiday story," he added.
By 1118 GMT the dollar index, which measures the U.S. unit's
performance against a basket of six currencies, was flat at
73.241 .DXY but stayed within sight of a one-month high of
73.428 set the previous session.
The euro was steady at $1.5590 <EUR=>, having fallen 1
percent the previous day. The dollar dipped 0.2 percent to
107.84 yen <JPY=>, reflecting tentative appetite in the stock
market. But it stayed close to a one-month high of 108.30 yen
reached on Tuesday.
While stock markets rallied, corporates were feeling the
impact of currency markets on their bottom lines. European
aerospace group EADS (EAD.PA: Quote, Profile, Research, Stock Buzz) said it was taking "decisive
actions" on currency hedging. Click on [ID:nL0561088].
Investors will watch the ADP national employment survey due
later in the day to help reassess forecasts for U.S. jobs
numbers that the government will release on Friday.
Economists polled by Reuters expect the ADP report to show
that 60,000 jobs were shed in July.
EURO ZONE SENTIMENT SLIDES
Economic sentiment in the euro zone skidded in July to its
lowest level since May 2003 as confidence fell in all sectors.
Euro zone economic sentiment worsened to 89.5, well below a
Reuters consensus forecast of 93.0. Consumer, industrial and
services sentiment were all below forecast. Click on [nL8697350].
Analysts said the data may well be a precursor to a shift in
European Central Bank monetary policy towards eventual rate cuts
from the current 4.25 percent.
"If activity slows as the survey suggests, inflation worries
must give way to anxiety over weakness in the real economy,"
Capital Economic's Jennifer Mckeown said.
Elsewhere, the Australian and New Zealand dollars fell on a
view that the impact of the economic slump and the credit crisis
was spreading into the region.
The Aussie was down 0.4 percent at $0.9486 <AUD=> after
hitting $0.9473, a six-week low, hurt by the slide in commodity
prices and after the nation's top banks disclosed increased
losses from exposure to distressed credit markets.
The New Zealand dollar declined 0.8 percent to a 10-month
low of $0.7330 <NZD=> after Reserve Bank of New Zealand Governor
Alan Bollard said he sees plenty of room for further interest
rate cuts. [ID:nSYD312931]
The RBNZ is expected to cut rates again in September after
it trimmed them by a quarter-point to 8 percent last week.
(Reporting by Veronica Brown; editing by David
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