Wednesday April 4, 2007 - 21:44:48 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar slips after ISM data disappoints
FOREX-Dollar slips after ISM data disappoints
Wed Apr 4, 2007 4:25pm ET27
(Updates prices, adds comment)
By David McMahon
NEW YORK, April 4 (Reuters) - The dollar fell on Wednesday after data showing growth in the U.S. service sector slid to a four-year low in March, reinforcing a view that the U.S. economy is weakening.
The dollar neared a two-year low against the euro after the Institute for Supply Management's non-manufacturing index fell to 52.4 in March, below even the lowest of 85 estimates in a Reuters survey. For details click on [ID:nN04328067]
The dollar had earlier trimmed some losses after Iran said it intends to release 15 British sailors and Marines held captive for more than a week, but those gains were quickly erased after the ISM data. [ID:nL04263278]
"This report is moderately negative for the dollar," said Dustin Reid, senior currency strategist at ABN Amro in Chicago. "But ahead of Friday's non-farm payrolls report and Thursday's Bank of England decision, I think the follow-through reaction will be muted."
With the ISM data out of the way, investors were looking ahead to the U.S. payrolls report on Friday, the most closely watched barometer of the health of the U.S. labor market.
A soft reading on jobs growth would likely heighten speculation that the Federal Reserve could cut interest rates from 5.25 percent as early as mid-year.
The dollar's declining yield appeal could be further highlighted if the Bank of England raises interest rates a quarter percentage point on Thursday, bringing them above the U.S. federal funds rate.
The euro was up 0.3 percent at $1.3370, still within sight of a two-year peak above $1.34 struck in March. The dollar fell against the yen, trading down 0.2 percent at 118.70 yen .
Sterling was barely changed on the day at $1.9757, short of peak of $1.9823 hit in the previous session, the highest in more than two months. Markets are pricing in an almost even money chance of a rate hike from the BoE, which has surprised investors with the timing of two of its last three rate rises.
The day's biggest winner was the Australian dollar , which rallied 0.7 percent to its highest in more than 10 years against the U.S. dollar, erasing earlier losses made after the Reserve Bank of Australia held rates steady at 6.25 percent.
"The Aussie setback has been short-lived as markets correctly assume the RBA rate hike is only delayed but not taken off the table," BNP Paribas said in a research note.
Traders said volume was thin in the lead up to the Easter holiday weekend, with many market players also sticking to the sidelines ahead of Friday's jobs report.
Investors shrugged off an earlier ADP private sector employment report which showed U.S. private employers likely added 106,000 jobs in March. The data is often viewed as a preview of the non-farm payrolls report, which economists expect to show growth of 120,000 jobs for the month. (Additional reporting by Vivianne Rodrigues and Gertrude Chavez)
Â© Reuters 2007. All Rights Reserved.
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