Tuesday December 23, 2008 - 11:17:16 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar slips vs euro as market awaits U.S. data
* Dollar dips vs euro in thin trade, dollar index down
* Investors await U.S. GDP, housing data
* U.S. firms forced to reduce costs; GM, Ford ratings cut
(Adds quotes, changes byline, dateline, previous TOKYO)
By Jessica Mortimer
LONDON, Dec 23 (Reuters) - The dollar edged lower against
the euro and a basket of currencies in thin trade on Tuesday as
worries mounted about the depth of the U.S. recession ahead of
major U.S. economic data due later in the day.
The dollar struggled on news that big U.S. manufacturers
were slashing costs, while ratings agencies dropped their
ratings on debt held by U.S. automakers which have just received
a lifeline from the U.S. government.
"Everything that is taking place (is) in conditions of
extremely low liquidity," Bank of New York Mellon head of
currency research Simon Derrick said.
"We have had a litany of bad news on the U.S. economy over
the past 24 hours and this continued negative news will weigh on
the dollar," he said, adding that ongoing bad news suggested
the economy was in for an extended period of recession.
In thin trade ahead of the Christmas and year-end holidays,
market players awaited U.S. data due later on Tuesday including
new and existing home sales for November and final figures on
U.S. third-quarter growth.
At 0906 GMT, the euro rose 0.2 percent against the dollar to
$1.3967 <EUR=>, while the dollar index -- a gauge of the U.S.
currency's performance against six major currencies -- edged
down 0.1 percent to 81.109 .DXY.
The euro also gained 0.2 percent to 125.90 yen <EURJPY=R>.
The dollar <JPY=> was steady at 90.17 yen, having recovered
from a 13-year low of 87.13 yen struck last week, after Bank of
Japan Governor Masaaki Shirakawa said on Monday yen strength and
a global slowdown may reduce Japanese exports further
U.S. DATA EYED
The dollar stayed on the back foot after several U.S.
manufacturers joined the list of firms slashing costs, with
Caterpillar Inc cutting white-collar pay by up to 50 percent and
Textron Inc announcing 2,200 job cuts worldwide [ID:nLN433742].
Concerns over the prospects for U.S. automakers also mounted
as ratings agency Standard & Poor's cut its unsecured debt
rating on General Motors (GM.N: Quote, Profile, Research, Stock Buzz) to 'C' [ID:nWNA2851] and Moody's
lowered ratings on Ford (F.N: Quote, Profile, Research, Stock Buzz) to 'Caa3' [ID:nWNA2853].
The dollar has lost momentum since the summer as demand from
U.S. portfolio managers receded and from hedge funds liquidating
assets and boosting cash holdings before year-end as the
financial crisis deepened.
U.S. data on Tuesday are expected to highlight the bleak
outlook facing the world's largest economy.
Economists expect the GDP data at 1330 GMT to confirm the
government's previous estimate of a 0.5 percent contraction in
the third quarter, which would mark the sharpest fall since the
third quarter of 2001.
U.S. existing and new home sales figures at 1500 GMT are
forecast to reveal further falls, while a University of Michigan
survey is expected to show consumer sentiment remains weak.
"A further decline in new and existing home sales in
November and a softening of the University of Michigan
confidence index implies that the cocktail of a weak labour and
employment market will keep consumer spending and hence growth
subdued well in to 2009," Calyon currency analyst Stuart Bennett
said in a note.
(Editing by Tony Austin)
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