Friday August 29, 2008 - 12:25:45 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar slips, but eyes best month in over 10 years
(Updates prices, adds comment and quotes, changes byline)
* Dollar slips but eyes best month since Jan. 1997
* Dollar index up 5 pct in August; last at 76.958 .DXY
* Sterling at new trade-weighted 12-year low <=GBP>
* Euro shrugs off soft inflation data
By Simon Falush
LONDON, Aug 29 (Reuters) - The dollar slipped on Friday,
shrugging off surprisingly strong U.S. growth figures from the
previous day as dealers opted to take more profits from the
currency's steepest monthly rise in over a decade.
The euro was resilient in the face of lower than forecast
euro zone inflation and sentiment indicators, as hawkish
rhetoric from policymakers kept the currency well-bid.
European Central Bank Governing Council member Klaus
Liebscher echoed comments from other policymakers earlier in the
week that inflation is too high [ID:nLT331903].
Click on [ID:nLT484244] for more on the euro zone data.
The dollar was hit by a one-percent rebound for oil prices
as Tropical Storm Gustav headed for the U.S. Gulf Coast and a
newspaper reported Russia might tighten supply.
But as August comes to an end, the greenback is up more than
5 percent against a basket of currencies, heading for its
biggest monthly gain since January 1997, Reuters charts show.
"If you'd have said at the start of the month that the euro
would be trading around $1.47 now, most people would say you
were slightly bonkers," said Jeremy Stretch, strategist at
"But for the moment (hawkish rhetoric from ECB policymakers)
is putting a floor under euro dollar."
At 1038 GMT the dollar index .DXY was down a quarter
percent on the day at 76.958. The euro was up 0.2 percent at
$1.4728, but more than 13 cents off its peak of $1.6038, set in
The dollar <JPY=> was down two thirds of a percent against
the yen at 108.76 yen and sterling was down a quarter of a
percent against the euro at 80.60 pence per euro <EURGBP=>.
Sterling has had an even steeper fall against the dollar in
August than the euro, down over 8 percent, its biggest drop
since it crashed out of the Exchange Rate Mechanism in 1992.
The pound plumbed a new 12-year low on a trade-weighted
basis on Friday on growing concern about the UK economy's
"The UK economic picture is deteriorating so rapidly, and
the recent housing market data is confirming that. The market is
rushing to revise down its growth forecast for the UK," said Ian
Stannard, senior foreign exchange strategist at BNP Paribas.
"Things are getting worse, not better, for sterling."
Friday is likely to be a shortened global session as U.S.
traders leave early for Monday's Labor Day holiday and the main
focus was expected to be U.S. inflation data and the latest
snapshot of regional U.S. business activity.
Dealers were expected to try to square positions by selling
into any dollar strength before the end of the month and before
next week's August U.S. employment report and central bank
policy decisions in the euro zone and UK.
The dollar came under some pressure on Friday from oil's
rise back above $117 a barrel CLc1, boosted by a report in
Britain's Daily Telegraph that Russia may restrict oil shipments
in the coming days in response to the European Union's threat of
sanctions over its military action in Georgia.
(Additional reporting by Naomi Tajitsu and Jamie McGeever)
(Reporting by Simon Falush, editing by Patrick Graham)
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