Tuesday August 28, 11:21 pm Eastern Time
Dollar Vulnerable Ahead of GDP Data
By Mariko Hayashibara
TOKYO (Reuters) - The dollar was in a well-worn range against the yen on Wednesday morning, but looked vulnerable on fresh worries about the health of the U.S. economy after an unexpected drop in consumer confidence.
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Weak consumer confidence data released on Tuesday muddied market expectations for Wednesday's revisions to U.S. gross domestic product (GDP) data for the second quarter, dealers said.
For the time being, the dollar has been drawing marginal support from the fragile Nikkei 225 share average, which is testing the 11,000 threshold, falling to a new 17-year low of 11,005.99 in morning trade.
``It's a very tricky situation,'' said a dealer at a major city bank.
``We have U.S. GDP data, the European Central Bank (ECB) meeting (on Thursday), and a flurry of negative factors surrounding Japan, but the dollar's downward bias is quite strong at this point,'' he added.
While a consensus of economists polled by Reuters expect the revised figure to reveal a flat second-quarter growth, down from the preliminary 0.7 percent growth, it could quite possibly turn negative.
In such a case, the U.S. economy would show a contraction for the first time in more than eight years.
The U.S. Commerce Department will release the GDP revision at 8:30 a.m. EDT.
Dealers noted selling interest from various accounts to test stop-loss orders seen around 119.75/85 yen, near Tokyo's low of 119.74 yen on Tuesday.
But as the market awaits the key events, the U.S. currency moved in a limited range, standing at 119.97/07 yen as of 10:04 p.m. EDT against 120.03 yen in late U.S. trade. It eased to a low of 119.86 yen in morning trade.
EURO BENEFITS, BUT ECB WORRIES PERSISTS
The unexpected drop in U.S. consumer confidence pulled the dollar down from a high of 120.82 yen in offshore trade.
Sentiment on the dollar was further dented on news that Gateway Inc. plans to slash its global workforce and to exit its company-owned operations in Asia and possibly Europe.
The waning U.S. consumer data offset news of a rise in euro zone M3 money supply data for July, dimming hopes the European Central Bank (ECB) might cut interest rates at its Thursday meeting -- a move seen by many investors as necessary to help boost a slowing European economy.
July M3 money supply rose an annual seasonally adjusted 6.4 percent, compared with expectations of an unchanged figure of 6.1 percent. But the ECB played down the jump, saying it was inflated by investors seeking refuge from volatile stock markets by moving into low-risk, short-term paper.
But dealers, initially expecting the ECB to cut interest rates by 25 basis points, were suspicious.
``The ECB may not take action this time, it may wait until September,'' said Toru Umemoto, currency strategist at Morgan Stanley Japan.
But Umemoto does not expect a clear direction even after the release of U.S. GDP or the ECB decision, saying that the three major currencies all faced negative factors.
The euro was little changed at $0.9123/28 from $0.9124 in late U.S. trade, while facing profit-taking interest around $0.9130.
Against the yen, the euro also barely moved, standing at 109.43/58 versus 109.51 in late U.S trade.
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