Saturday August 30, 2008 - 01:26:06 GMT
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Reuters - www.reuters.com
FOREX NEWS - US dollar rises, eyes best monthly gain in 16 years
* Dollar index has best month since October 1992
* Dlr has best month vs euro since single currency launch
* Jump in U.S. Midwest business adds to dollar's allure
(Updates prices, adds comment, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 29 (Reuters) - The U.S. dollar rallied
against a currency basket on Friday, on track for its best
monthly gain in nearly 16 years, boosted by a batch of data
showing a far more stable growth path for the United States
than the rest of the world.
U.S. consumer spending slowed in July, but this was more
than offset by a report showing business activity in the U.S.
Midwest expanded at a more robust rate than expected, fueling a
round of dollar buying.
"The U.S. data contrasts with weaker reports from abroad as
the global economy deepens its slowdown," said Joe Manimbo, a
currency trader at Ruesch International in Washington. "This is
a continuation of the more upbeat sentiment on the U.S.
Separate data showing U.S. consumer confidence rose to a
five-month high in August, posting a sharp recovery from
depressed levels with the help of easing energy prices, added
to dollar optimism even, if it offered little new trading
In late New York trading, the dollar index .DXY on the
ICE Futures Exchange was up 0.3 percent on the day at 77.327.
Friday's gains have put the index on pace for its best monthly
performance since October 1992, according to Reuters data.
The euro was down 0.2 percent at $1.4670, off more than 8
percent from its all time peak set in mid-July <EUR=> and on
pace for its worst monthly loss since its launch in 1999.
Friday's reports follow data earlier in the week showing
greater-than-expected U.S. economic growth in the second
quarter and strong durable goods orders for July.
The dollar <JPY=> was down 0.6 percent against the yen at
108.62 yen, but was up nearly 1 percent this month.
The U.S. dollar rose 1.2 percent versus the Canadian dollar
to C$1.0631 <CAD=>, its biggest one-day gain in three weeks,
after data showed the Canadian economy narrowly skirted a
recession in the second quarter, growing 0.3 percent.
Economists were expecting a 0.7 percent expansion.
WEAK CANADIAN DOLLAR, STERLING
Still, some analysts say a weak gross domestic product
number is not sufficient to warrant an interest rate cut from
the Bank of Canada.
"Though Canadian growth may prove slightly weaker than
expected in H1 2008, the accumulated impact of rate cuts to
date should help cushion any downside risks," said analysts at
Morgan Stanley in a research note.
"On the other hand, inflation remains elevated, even if the
recent decline in commodity prices suggests scope for softening
Sterling was also one of the major casualties in the
currency market this month, down 8.1 percent versus the dollar,
its biggest drop since it crashed out of the Exchange Rate
Mechanism in 1992.
The pound last traded down 0.4 percent at $1.8207 on the
The Australian dollar fell nearly 9 percent in August, its
worst month since February 1989, according to Reuters data, on
expectations of narrowing interest rate differentials between
the United States and Australia. It last traded at US$0.8579
<AUD=>, down 0.6 percent.
Investors expect sentiment on the U.S. dollar to remain
bullish in the coming week. But some market participants could
to try to square positions by selling into any dollar strength
ahead of next Friday's August U.S. employment report and
central bank policy decisions in the euro zone and the UK.
Analysts expect next week's U.S. non-farm payrolls report
to show a 73,000 contraction, according to a Reuters poll.
"U.S. payrolls will likely show a decline, but markets will
only be moved if losses exceed 100,000, having gotten used to
the slow drip of job shedding this year," said Avery Shenfeld,
a senior economist at CIBC World Markets in Toronto.
(Additional reporting by Nick Olivari; Editing by Leslie
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