Friday August 1, 2008 - 21:19:22 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar rises to 5-wk high vs euro, buoyed by US data
* Dollar rises after U.S. nonfarm payrolls report
* U.S. manufacturing activity holds steady in July
* Yen rises broadly as risk aversion increases
(Recasts, updates prices, adds comments, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 1 (Reuters) - The U.S. dollar climbed to
five-week peaks against the euro and three-week highs against
the British pound on Friday as better-than-expected economic
data allayed worries about a much sharper slowdown.
The yen, on the other hand, gained broadly, benefiting from
heightened stress in financial markets on news that General
Motors (GM.N: Quote, Profile, Research, Stock Buzz) had hefty losses in the second quarter. That
dragged U.S. stocks lower and triggered safe-haven bids for
"U.S. dollar sentiment has certainly changed for the better
over the last couple of weeks," said Mark Frey, head foreign
exchange trader at Custom House, a global payments dealer in
Victoria, British Columbia.
"The U.S. economy has gone through some tough phases, but
the jobs number was negative, but still better than expected. I
think, more importantly, recent consumer confidence numbers and
leading indicators, which are more forward-looking, have been
more positive," he added.
Friday's data showed that U.S. employers eliminated 51,000
jobs in July, lower than market expectations for a payrolls
decline of 75,000. A separate report said U.S. factory activity
was unchanged in July, compared with the previous month, but
above market forecasts. For details, see [ID:nN01429062].
In late New York trading, the euro was down 0.4 percent at
$1.5538 <EUR=>. It dropped to $1.5514 immediately after the
U.S. jobs data, its lowest since June 24, according to Reuters
The ICE Futures U.S. dollar index rose as high as 73.527
.DXY, building on July's gains, which saw it post its biggest
monthly gain since January 2007. The index, which measures the
dollar's performance against a basket of six currencies, was
last up 0.4 percent at 73.461.
Sterling, meanwhile, fell to three-week lows at $1.9729
<GBP=>. It last traded at $1.9732, down half a percent from
late on Thursday.
Following the latest U.S. data, investors widely expect the
Fed's policy-making Federal Open Market Committee (FOMC) to
keep its benchmark federal funds rate steady at 2 percent when
it meets on Tuesday.
The implied chances for rate increases rise steadily from
there to 36 percent in September and 66 percent in October, but
the first 25 basis-point-hike is not fully priced until the
January FOMC meeting.
INCREASED RISK AVERSION
Rising risk aversion amid a drop in U.S. and key European
stock markets dragged the dollar lower against the yen.
Shares of GM plunged more than 7 percent after the top U.S.
carmaker posted a second-quarter loss of $15.5 billion, or $6.3
billion excluding one-time items, much worse than forecast.
A rise in crude oil prices also hurt the dollar against the
yen. U.S. crude oil CLc1 rose $1.02 to settle at $125.10 a
barrel as geopolitical concerns fanned supply worries after a
top Israeli official said Iran was heading toward a major
breakthrough in its nuclear program. [O/R].
The dollar last traded down 0.1 percent at 107.73 yen
<JPY=>. Against the euro, the yen rose 0.5 percent, pushing the
single currency to 167.37 <EURJPY=>.
The Australian dollar tumbled to a 2-1/2 month low at
US$0.9289 <AUD=>, as speculation mounted that the Reserve Bank
of Australia could set the tone for lower interest rates after
its policy meeting next week.
The New Zealand dollar also slumped to US$0.7247 <NZD=>, a
10-month low, on deepening concerns over the local financial
sector. It was last at US$0.7267, down 0.9 percent on the day.
By contrast, prospects for the U.S. dollar have started to
improve since early last month as evidence mounted that
America's credit and housing woes were spreading to other parts
of the world such as the euro zone and Britain.
News out of the United States has been less dire than
expected and falling oil prices have eased worries about the
world's largest economy.
"The U.S. has taken further steps to ease the problems
plaguing the housing market. Relatively speaking, the downward
movement in Europe is now clearly more pronounced and the
downshift has only just started," Danske Bank said in a
(Additional reporting by Lucia Mutikani; Editing by Jonathan
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