FOREX NEWS-U.S. dollar snaps five-day rally vs euro
Tue Aug 12, 2008 4:23pm EDT
* Dollar rally stalls on profit-taking
* Euro still under pressure as economic worries deepen
* Russian ruble gains versus the dollar (Adds comments, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Aug 12 (Reuters) - The U.S. dollar slipped against the euro on Tuesday, breaking a five-session rally as investors locked in profits ahead of key economic data later in the week.
The dollar has rallied more than 4 percent against the euro this month with help from a sell-off in oil prices and growing fears economies elsewhere may slow at a faster pace than in the United States.
The euro slid to a six-month low against the dollar earlier after breaking a series of key chart levels, convincing some analysts that the greenback may be ending its seven-year slide.
Still, demand for the U.S. currency waned on Tuesday and investors shrugged off data showing the U.S. trade deficit unexpectedly shrank in June. The dollar also accelerated its losses against the yen in late afternoon trading after selling on Wall Street picked up speed.
"The dollar has been moving in one direction higher for the last week or so," said Ronald Simpson, managing director of global currency analysis at Action Economics, in Tampa, Florida. "The market is just taking some dollars off the table here."
"Going forward, the direction will be determined by some of the U.S. data coming out later in the week, and also to a degree by what happens with commodity prices," Simpson added.
Oil prices fluctuated on Tuesday, but last traded down 1.3 percent at $113.17 per barrel Clc1, after dropping more than $30 since a record high hit in July. Fears of rising oil prices had been weighing on the outlook for the U.S. economy.
In late trading in New York, the single European currency edged up 0.1 percent to trade at $1.4923 <EUR=>, after earlier touching a six-month low of $1.4814, according to Reuters data.
The Russian ruble was one of the biggest gainers versus the dollar on Tuesday, coming as Russia ordered a halt to military operations in Georgia. For details, see [ID:nN11408884]
The ruble was last 0.8 percent higher at 24.2494 to the dollar <RUB=>, posting its best one-day gain since May.
The dollar index .DXY, which measures the greenback against a basket of six currencies, fell 0.1 percent to 76.133 after hitting a six-month high earlier in the session. The index had surged more than 4 percent this month.
The dollar was 0.7 percent lower at 109.33 yen <JPY=>, a day after hitting a seven-month peak of 110.40 hit on the EBS trading platform. The euro fell against the Japanese yen to trade 0.5 percent lower at 163.16 <EURJPY=>.
Losses in the greenback were limited as investors awaited data on U.S. retail sales and consumer prices for July, due out Wednesday and Thursday.
The U.S. economy is still ailing, with the financial sector reeling from a year-old credit crisis, but analysts say the outlook elsewhere in the world has buoyed the dollar's position.
"The fact that the market could not trade above $1.50 again is probably a good sign if you're a dollar bull," Simpson said. "For the time being, unless we get some really shocking economic numbers, the risk going forward is that the dollar continues to test higher."
The euro area and Britain have buckled under the twin strains of higher inflation and fading growth. European Central Bank President Jean-Claude Trichet said last week the euro zone economy was slowing more than policy-makers had expected.
Sterling fell to a 1-1/2 year low versus the dollar below $1.90 <GBP=>, down 0.7 percent from late on Monday.
The dollar selling came despite data on Tuesday showing the U.S. trade deficit shrank unexpectedly in June to $56.8 billion, down from a revised $59.2 billion in May. For more details, see [ID:nN12480282]..
The report was "better than expected," said Dustin Reid, senior currency strategist at ABN Amro in Chicago. "But there might be some people just trying to get out of recently established long dollar positions on the back of stronger-than-expected data." (Additional reporting by Vivianne Rodrigues; Editing by Leslie Adler)
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
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