Wednesday May 2, 2007 - 20:46:37 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar edges up; all eyes on US payrolls
FOREX-Dollar edges up; all eyes on US payrolls
Wed May 2, 2007 4:10 PM ET
(Updates prices, adds comment)
By Steven C. Johnson
NEW YORK, May 2 (Reuters) - The dollar edged up in thin trade on Wednesday, briefly brushing a two-month high against the yen, as dealers scaled back bets that the greenback would slide ahead of upcoming data on U.S. job growth in April.
The advance added to Tuesday's dollar gains after data showed manufacturing activity in April grew at its quickest pace in nearly a year.
Market participants, though, still expect U.S. interest rates to fall later this year to stimulate a slowing economy, making Wednesday's gains look more like a brief speed bump in the dollar's steady grind lower against its major rivals.
"This is not about changed attitudes toward the dollar or even a reappraisal of the fundamentals but more about tired positioning and a need for a 'healthy' correction," said Divyang Shah, chief strategist at Commonwealth Bank in London.
Late afternoon, the euro was down 0.1 percent at $1.3592 , off last week's record high above $1.3680. It briefly touched 1.3612, a session peak, on a report that euro zone ministers are not concerned about the currency's strength.
The dollar was up 0.3 percent against the yen from late Tuesday at 120.08 yen . Earlier, it hit a two-month high near 120.30 yen.
Sterling was one of the biggest movers on the day, falling 0.5 percent to $1.9890 and below the psychologically important $2.00 level for the first time since mid-April.
Trading volume was fairly light on the day, with traders outside the United States taking an extended May Day holiday.
DATA MIXED, JOBS ON TAP
Where the market takes the dollar from here likely depends on Friday's jobs report.
Economists polled by Reuters expect a job gain of 100,000 in April. But Wednesday's ADP employment report, which measures private sector job growth, revealed a more modest 60,000 gain, suggesting the government report may undershoot forecasts.
"People are bearish the dollar, and the jobs report will be the trigger to either keep (selling) or to pull back," said David Watt, senior strategist at RBC Capital Markets in Toronto.
Recent U.S. data has been mixed. While ADP pointed to weaker job growth in April, a separate report on Wednesday pointed to higher-than-forecast growth in factory orders in March, which helped the dollar stabilize after recent moves lower.
"What we're seeing now is people are paying more attention to the positive data out of the States, whereas just a month ago people were shrugging off any positive data," said Tim O'Sullivan, trading manager at Forex.com in Bedminster, New Jersey.
Meanwhile, the market continues to debate how much the U.S. economy is slowing relative to other major economies.
Euro zone growth is seen outstripping that in the United States, and markets are gearing up for additional rate hikes from the European Central Bank this year.
But data on Wednesday showed the euro zone Purchasing Managers' Index held at 55.4 in April, matching March's 13-month low. That was slightly below forecasts but still above 50, the point that indicates growth.
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