FOREX-Dollar rebounds from record low vs euro
(Updates prices, adds detail, Thai PM comment on baht)
By Steven C. Johnson
NEW YORK, Sept 26 (Reuters) - The U.S. dollar recovered from record lows against the euro and pulled back from near a 15-year trough versus a basket of major currencies on Wednesday as buyers took advantage of cheap exchange rates.
An unexpectedly steep decline in new orders for U.S.-made durable goods last month failed to up-end the dollar's modest rebound even though it backed the case for the Federal Reserve to cut interest rates again in October.
The U.S. central bank slashed benchmark rates by half a percentage point last week, the first reduction since 2002.
Traders said further monetary easing at the central bank's Oct. 30-31 policy meeting had already been priced in by the market, but expectations for the size of the cut would depend on upcoming economic data including the September jobs report.
"The trend of a weaker dollar is still very much intact, but we did get some people taking profits today," said Adam Hewison, senior currency strategist at INO.com in Baltimore. "But if we see further cuts in interest rates, pressure on the dollar will increase."
The anticipated cut in U.S. rates will further reduce the appeal of the dollar's yield, analysts said.
The euro <EUR=> last traded at $1.4124, down 0.2 percent on the day, after racing to a lifetime high of $1.4162 in European trade, according to Reuters data.
The dollar rebounded when it dropped to near 1992's all-time low against a basket of six major currencies, with the dollar index last trading at 78.515 (.DXY: Quote, Profile, Research), up 0.3 percent on the day.
The dollar's recovery was also aided by firmer U.S. stocks and rising U.S. Treasury debt yields.
Also on Wednesday, the United Arab Emirates called the dollar's recent decline temporary and said it would retain its peg to the U.S. currency.
Analysts said while statistical indicators pointed to the dollar being oversold against major currencies, it was too early to call Wednesday's recovery versus the euro the start of the long anticipated correction.
"The market is taking a pause either before continuing to sell the dollar or entering a short period of dollar correction," said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto.
Against the yen <JPY=>, the dollar rose 0.7 percent to 115.55, boosted in late trade as stocks rallied on news that Bear Stearns (BSC.N: Quote, Profile, Research) is in talks to sell a minority stake.
Investors see equities as a fair gauge of global risk.
The market largely shrugged off data showing August's decline in long-lasting U.S.-made manufactured goods was the steepest in seven months. Analysts said the numbers are notoriously volatile. For details, see [ID:nN26167425].
Although the market had priced in further U.S. monetary policy easing next month, such a move would lead investors to expect the Fed to continue lowering rates until the economy showed signs of a strong recovery, analysts said.
The euro has appreciated nearly 4 percent against the dollar so far in September, while emerging market currencies have also posted hefty gains.
On Wednesday, Thai Prime Minister Surayud Chulanont told a gathering at the Asia Society in New York that Thailand wants to depreciate its currency, the baht, but added it lacks the resources to do so right now.
The baht has risen more than 5 percent against the dollar <THB=> so far this year after gaining 14 percent in 2006. (Additional reporting by Lucia Mutikani in New York and Vithoon Amorn in Bangkok)