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Dollar bounces after fresh low on euro
2007-10-01
The dollar touched a fresh record low against the euro Monday before seeing a modest rebound as traders girded for a key labor market report this week which will give fresh insight into the strength of the US economy. The euro rose to an all-time high of 1.4283 dollars in Asian trading before settling back to 1.4231 dollars at 2100 GMT compared with 1.4266 dollars in late trading in New York on Friday. The dollar rose to 115.71 yen, against 114.80 yen late on Friday. Analysts said the market was focusing on the soft US economy and prospects for further cuts in interest rates, but they said the yen was pressured by concerns that the Japanese economy is facing more turbulence. "The yen is trading with a weak-underlying tone against most major currencies except the dollar," said Susan Voigtsberger at PNC Bank. "There is still evidence that deflation in Japan remains problematic. While retail sales were up in August, consumer prices dropped slightly, unemployment is higher and industrial production is suffering. This will prevent the central bank from raising rates in the near future." The Tankan survey showed business confidence among large manufacturers was stable at 23, close to December's two-year high of 25. A positive reading means confident firms outweigh the pessimistic ones. At the same time confidence fell among big non-manufacturers as well as smaller firms. In the US, markets were awaiting Friday's pending US jobs report to see if last month's surprise fall in jobs is repeated. Last month, the economy lost an estimated 4,000 jobs. Traders were looking ahead to the US non-farm payrolls data for fresh leads on the impact of credit market and housing woes on the economy. "Although the market has already anticipated poor jobs data, traders are waiting to see if the Fed will reduce interest rates again," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank. Market expectations are focused on the next rate decision by the US Federal Reserve Bank on October 31. The Fed cut its main interest rate by half a percentage point to 4.75 percent in September. Analysts are betting on a new rate cut next time round to cushion the US economy, but are divided over how big the cut will be. But Boris Schlossberg at Forex Capital Markets said most of the bad news is already priced into the greenback. "Despite the gloom and doom that has pervaded the markets the dollar bears may be overplaying their hand," he said. "While the path of least resistance is down, the dollar remains grossly oversold, and a better than expected (payrolls report) could bring some temporary relief to downtrodden dollar longs," Schlossberg added. In late New York trade, the dollar stood at 1.1862 Swiss francs from 1.1633 late Friday. The pound fell to 2.0429 dollars from 2.0470 dollars.
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