Friday January 2, 2009 - 14:56:50 GMT
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Reuters - www.reuters.com
FOREX NEWS-US dollar rises in thin trade; sterling sinks
* Dollar broadly firmer in holiday-thinned trade
* Euro-zone manufacturing data falls to 11-yr low in Dec
* Sterling hurt by weak UK housing, lending data
(Adds comments, details, changes byline and dateline, previous
By Vivianne Rodrigues
NEW YORK, Jan 2 (Reuters) - The U.S. dollar started 2009 on
a firm tone on Friday as investors sold the European currency
as data showed deepening recession in the euro zone.
Demand for the single currency also fell as traders deemed
the euro's rapid advance versus the greenback last month was
unsustainable. Thin trading volumes during the holidays may
exacerbate currency moves, they added.
"Indeed markets are thin as many are opting to take today
off," said Dustin Reid, director of FX strategy at RBS Global
Banking & Markets in Chicago. "As a consequence, we will not
likely see full liquidity back into markets until next week or
possibly even the week after."
Euro-zone manufacturing activity fell to the lowest in the
survey's 11-year history. The final reading of the Markit
Eurozone Purchasing Managers Index (PMI) for the manufacturing
sector fell to 33.9 in December, below market forecasts.
In morning trading in New York, the euro <EUR=> was down
0.7 percent against the dollar at $1.3882, having earlier hit a
session low of $1.3841. The dollar was up 0.5 percent to 91.20
Investors have shunned the dollar and shifted into euros
recently as the U.S. Federal Reserve cut interest rates to near
zero, while the European Central Bank has adopted a more
gradual approach to cutting interest rates.
"Currency markets will struggle to balance the euro's
upside from interest rates not being cut aggressively with the
concern that the economy is destined for a sharp deterioration
on the back of this measured policy reaction," said Daragh
Maher, currency strategist at Calyon in London.
Meanwhile, sterling resumed its downtrend in choppy trade,
after data painted a gloomy picture of the UK economy.
The euro was up 0.7 percent against sterling at 96.07 pence
<EURGBP=D4>, after dropping more than 1 percent in Asian trade.
It had hit a record 98.05 pence earlier this week.
The pound was also down 1 percent against the dollar at
British mortgage approvals for house purchases fell to a
record low in November [ID:nBOE001688], while a separate Bank
of England survey showed credit conditions looked set to
tighten further in the next three months [ID:nBOE001689].
House prices also fell by a bigger-than-expected 2.2
percent in December, the country's biggest mortgage lender
Halifax said [ID:nLAJ000130]
"There just doesn't seem to be any floor at the moment to
any of the housing market data," said Matthew Sharratt, UK
economist at Bank of America.
The figures reinforced expectations the BoE will cut key
interest rates by at least 50 basis points next week from the
current 2 percent.
On the U.S. data front, traders will keep a close eye on
the Institute for Supply Management's December manufacturing
index due out at 10 a.m. (1500 GMT). Economists expect a
reading of 35.5 versus 36.2 in November, according to a Reuters
The dollar index, a gauge of its performance against six
major currencies, rose 0.7 percent to 81.69 .DXY.
(Additional reporting by Tamawa Desai in London; Editing by
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