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Dollar slides as U.S. outlook
sours
Reuters
Monday May 07, 2007
The dollar slipped on Monday ahead of three central bank meetings
that may underscore market expectations for U.S. interest rates
to fall this year as rates in other major economies climb higher.
While the Federal Reserve is seen holding rates at 5.25 percent
after its meeting on Wednesday, analysts say officials may concede
signs of slower U.S. growth after recent data revealed anemic job
growth in April, causing the dollar to drift lower.
The Bank of England, meanwhile, is seen lifting rates to 5.5 percent
on Thursday, a move that would put British interest rates above
those in the United States for the first time since January 2006.
The European Central bank is expected to hold its rates steady
at 3.75 percent on Thursday but signal a hike in June.
"The market is fully prepared for the Fed to be on hold and
will focus on the verbage of the statement for any suggestion of
further dollar downside," said Charmaine Buskas, FX analyst
at Moody's Economy.com in West Chester, Pennsylvania.
The greenback lost ground against all the major currencies on Monday,
though a public holiday in Britain thinned out trade and kept losses
modest.
The euro was last trading at $1.3604, up 0.1 percent from late
Friday, and near a lifetime high above $1.3680.
Analysts said Nicolas Sarkozy's victory in the French presidential
election provided modest support.
"With Sarkozy's policies aimed at making the labor market
more flexible and promoting market oriented policies to improve
economic growth, his win is supportive of the euro," strategists
at BNP Paribas wrote in a note to clients.
The dollar was down 0.2 percent at 120.02 yen while sterling edged
up 0.1 percent to $1.9937.
The Canadian dollar was the biggest mover on the day, rising to
an 11-month high against its U.S. counterpart after Alcoa Inc. (AA.N:
Quote, Profile, Research announced a $27 billion hostile bid for
Canadian rival Alcan (AL.TO: Quote, Profile, Research. Dollar/Canadian
dollar last changed hands at C$1.1023.
U.S. IN FOCUS
Analysts said slower U.S. growth at a time when other major economies
are moving full steam ahead should keep the dollar under pressure.
But while U.S. consumers have so far continued to spend, retail
sales data due on Friday are seen of particular importance.
"Everyone is expecting euro-dollar to hit $1.40 in the next
month or so, but if the consumer continues to spend without restraint,
that certainly helps keep the dollar supported," said Ezechiel
Copic, FX analyst at IDEAglobal in New York.
Alternatively, any signs of a downturn in spending will hurt the
dollar.
"Deterioration in the housing market and gasoline price pressures
have the market looking for signs that the consumer is retrenching,"
said Economy.com's Buskas.
Until then, the euro could make a run at its record high against
the dollar if the Fed on Wednesday emphasizes growth risks while
downgrading its assessment of inflation risks.
A Reuters poll showed that the soft jobs data reinforced Wall Street's
view that the Fed will cut rates this year.
The median forecast of 18 primary dealers who took part in the
survey was for the fed funds rate to stand at 5.0 percent at the
end of December, just a quarter-percentage point below its current
level.
INFOWARS:
BECAUSE THERE'S A WAR ON FOR YOUR MIND
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