Wednesday August 20, 2008 - 20:01:22 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar rises, snaps two-day decline
* Dollar rises after two days of losses
* U.S. crude oil futures reverse losses
* Focus on euro zone PMI, UK retail sales data
(Adds details, updates prices, changes byline)
By Lucia Mutikani
NEW YORK, Aug 20 (Reuters) - The U.S. dollar rose on
Wednesday, snapping a two-day losing streak, supported by
perceptions that slowing global economic growth would prompt a
wave of interest rate cuts outside the United States.
The greenback clung to gains in quiet trade despite a
rebound in crude oil prices to around $115 a barrel. The dollar
index came within striking distance of its 2008 highs touched
"The perception overall is that the economic and interest
rate outlook still are supportive of the dollar and in the
bigger picture, the dollar remains in buy-the-dips-mode for
now," said Ronald Simpson, head of global currency analysis at
Action Economics in Tampa, Florida.
Data from Europe and Japan are increasingly pointing to a
deterioration in the growth outlook for those regions, leading
investors to anticipate early rate cuts from both the European
Central Bank and the Bank of England.
Such a step would shift the yield appeal in the dollar's
favor, with the Federal Reserve expected to start raising
interest rates next year, provided there are no major shocks
from the U.S. financial sector.
The ICE Futures U.S. dollar index, which measures the
dollar's value against a basket of six currencies, rose to a
session high of 77.24 .DXY -- not far from its highest level
this year at 77.413. It was last up 0.3 percent at 76.960.
The euro dropped to an intraday low of $1.4673 <EUR=>,
within spitting distance of its six-month low around $1.4631
hit on Tuesday, according to Reuters data. It was last down 0.3
percent at $1.4737.
"The euro has been trying hard over the last days to make
some form of sustained bottom and create a little bit of a
counter-trend rally. As it rallies to 1.48, it tends to get
sold," said Boris Schlossberg, director of FX research at GFT
Forex in New York.
"Unless it takes out the 1.48 level and maintains that
level, the bias is very much to the down side. Every (euro)
rally is still very much a sell mode. Until the market
psychology exhausts that whole dynamic, it's pretty much the
story for the day."
Data on Wednesday showed that euro zone construction
shrank by 0.6 percent in June from May, a factor that was also
weighing on the euro against both the dollar and yen.
At the same time, Japan's all-industries index, which
covers a broad range of economic activity including the
tertiary activity index, fell 0.9 percent in June from the
The dollar firmed 0.1 percent to 109.81 yen <JPY=>, after
earlier rising to 110.27 yen. Those gains were eroded as U.S.
crude futures reversed early losses in choppy trade and worries
over the health of the country's financial sector lingered.
There are worries that U.S. home finance providers Fannie
Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) may need a government
Euro zone PMI and UK retail sales data on Thursday will
likely provide more evidence of slowing growth in the euro area
and Britain, analysts said.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
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