Monday April 30, 2007 - 21:37:28 GMT
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FOREX NEWS-Dollar down, ends worst month since November
FOREX-Dollar down, ends worst month since November
Mon Apr 30, 2007 4:14 PM ET
By Steven C. Johnson
NEW YORK, April 30 (Reuters) - Signs of sluggish U.S. growth pushed the dollar just shy of a record low against the euro on Monday, capping the U.S. currency's steepest monthly slide since November.
A pair of economic reports showing subdued inflation and Midwest business activity pointed to a continued slowdown in the U.S. economy and provided what Bank of New York currency strategist Michael Woolfolk called "one more green light to sell the dollar."
On Friday, a report showing first-quarter gross domestic product grew at its slowest pace in four years prompted investors to lift the euro to a lifetime high above $1.3680.
Traders warned that a worse-than-expected employment report later this week-- economists expect a 100,000 job gain in March -- could push the pair above $1.3700.
"The next major body blow for the dollar, I suspect, will likely be weak labor reports," said Stephen Jen, global head of currency research with Morgan Stanley in London. "The timing is not yet ripe ... for investors to be long dollar, despite valuation and market positioning," he said in a note.
Late on Monday afternoon, the euro was trading at $1.3645, near its closing level on Friday, after earlier hitting a session peak around $1.3680. It hit $1.3683 on Friday, according to electronic platform EBS, its highest level since its launch in 1999.
The dollar index -- a measure of the greenback's value against a basket of six major currencies -- was down 0.1 percent at 81.430 <.DXY>. A break below key technical support around 81.20 would pave the way for more dollar weakness, analysts said.
The dollar was down 0.1 percent against the yen, trading at about 119.45 yen , while sterling slipped 0.1 percent to $1.9995 , near a 26-year high touched earlier this month.
LOSING A LIFELINE
April has been the cruelest month for the dollar. The dollar index is down some 1.8 percent, its biggest monthly decline since November.
The euro has climbed more than 2 percent against the dollar since April began, the largest increase since November, and analysts expect the rally to continue at least until the second half of the year.
"We're still looking at euro-dollar at $1.40 eventually," said Meg Browne, senior currency strategist at Brown Brothers Harriman in New York. "The big, underlying theme remains that the European economy is doing well, the U.S. less so, and the European interest rate cycle keeps going."
Investors are expecting the Federal Reserve will cut interest rates at least once this year, compared with forecasts for higher rates in the euro zone and Britain, among others.
Those expectations are causing the dollar to lose its lifeline of yield support. The spread of the benchmark 10-year U.S. Treasury yield over euro zone paper with the same maturity has been below 50 basis points since April 18 and last week was the narrowest since late 2004, according to Reuters data.
The Canadian dollar was one of the biggest movers on the day because of stronger-than-expected economic growth data, which pushed the loonie to a seven-month high. The U.S. dollar was down nearly 0.7 percent to C$1.1095 .
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