Thursday October 5, 2006 - 00:33:49 GMT
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Reuters - www.reuters.com
FOREX-Dollar edges higher, helped by oil
FOREX-Dollar edges higher, helped by oil
Wed Oct 4, 2006 4:36pm ET161
(Updates prices, adds comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 4 (Reuters) - The dollar firmed against most major currencies on Wednesday, ignoring weak U.S. jobs and services reports as generally weaker oil prices eased investor concerns the U.S. economy may not slow as much as initially thought.
The market has focused on the week's big tumble in commodity and oil prices, and that has punished currencies of commodity exporters such as South Africa and Norway while buoying the dollar.
"We see oil prices holding below $60 a barrel and the stock market is continuing to rally," said Kathy Lien, chief fundamental analyst at Forex Capital Markets in New York.
"What that has allowed the U.S. dollar to do is shrug off the weaker economic reports and register more gains despite signs of slower growth. It seems like the market is hoping that weaker oil prices would save the day for the dollar and deliver us more consumer spending," she added.
Crude oil prices have tumbled 25 percent from record peaks in July, falling to seven-month lows below $58 a barrel on Wednesday before trading back up to $59.50 amid fresh violence in Nigeria, the world's eighth-largest oil exporter.
Oil's decline has allayed the view of many dollar bears that a rapidly slowing economy could lead the Federal Reserve to cut interest rates as early as December.
Fed Chairman Ben Bernanke, speaking before the Economics Club of Washington, said on Wednesday that the U.S. housing market is currently in a substantial correction. The dollar pared gains against the euro after his comment.
"I think his comments on housing merely confirm what we're seeing in the data, and that is that housing is weakening substantially and poses a risk to the overall health of the economy," said Alex Beuzelin, senior market strategist at Ruesch International in Washington.
In late afternoon trading, the euro was down 0.2 percent at $1.2713. The dollar was little changed against the yen at 117.84 yen, still in sight of Monday's 5-1/2-month peak at 118.39 .
The euro hit a one-month high of 150.47 yen on electronic trading system EBS, close to the record high around 150.80 hit in August, before reversing gains to 149.84 , down 0.2 percent on the day.
The Norwegian crown -- the currency of one of the world's biggest oil producers -- fell to its weakest level since February 2005 versus the euro and to six-month lows against the dollar.
The euro traded at 8.3853 crowns , little changed on the day after touching a peak of around 8.4425 earlier.
Also on Wednesday, New York Federal Reserve President Timothy Geithner said China is committed to more exchange rate reform, but that such changes would take time. His comments did not have an impact on the market.
Against the Swiss franc, the dollar rose 0.3 percent to 1.2484 francs . Sterling was down slightly at $1.8859 .
Traders shrugged off ADP Employer Services data -- a prelude to the Labor Department's nonfarm-payroll survey due Friday -- that showed U.S. private employers added just 78,000 jobs in September, well below forecasts.
The market also ignored a report from the Institute for Supply Management indicating a surprisingly steep decline in U.S. services sector activity in the same month. For more, see [ID:nN04266764]
(Additional reporting by Steven C. Johnson)
Â© Reuters 2006. All Rights Reserved.
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