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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: J.T. who wrote (5735)	1/3/2001 3:12:53 AM
From: J.T.	Read Replies (1) \| Respond to of 19219

Dollar Falls to 6-Month Low vs Euro on NAPM, Slowing Economy from Bloomberg By Geraldine Ryerson-Cruz New York, Jan. 2 (Bloomberg) -- The dollar fell to a six- month low against the euro after a weaker-than-expected U.S. manufacturing report stoked expectations the economy will slow more than the euro region's. Factory activity contracted in December to its lowest since the last recession in 1991, the latest indication the world's largest economy is losing momentum. By contrast, reports in the euro zone's three largest economies show they continue to expand. The U.S. report is ``clearly showing the manufacturing sector in very bad shape,'' said Robert Blake, senior economist at Royal Bank of Scotland Financial Markets. While there are signs of cooling in European manufacturing ``it's not actually contracting as it is in the U.S.,'' so ``we expect the euro to continue climbing against the dollar.'' Against the euro, the dollar slipped to its weakest since July 12 at 95.09 cents per euro, from 94.24 yesterday. Japan's currency traded at 114.50 from 114.35 yen yesterday, near the 16- month low of 115.07 yen per dollar it reached Friday. The yen fell to 108.75 per euro, from 107.70. The U.S. currency extended earlier declines after the National Association of Purchasing Management's index fell in December for a fifth straight month, to 43.7, its lowest level since April 1991 and below the 47 reading predicted by economists surveyed by Bloomberg News. A reading below 50 signals a contraction. Inflation Risk At the same time, the NAPM index of prices paid for raw materials rose to 61 in December from 56.6 in November. Indications inflation may accelerate damp optimism that the Federal Reserve will cut interest rates aggressively in coming months to stimulate the economy. ``The Fed's main concern is that we still have risks on the inflationary side,'' said Lara Rhame, a foreign exchange economist at Brown Brothers Harriman & Co. While the central bank may still cut rates later this month, as economists predict, ``I don't think this sets us up for a really aggressive slew of moves'' to lower lending rates. Reports also showed factory activity in the euro zone's three largest economies tapering. The BME/Reuters manufacturing index for Germany fell to 54 in December from a reading of 55.4 in November, Market News International said. A similar index declined to 52.8 from 54.1 in the same period in France and dropped to 53.9 from 55 in Italy. A reading above 50 still indicates expansion. U.S. growth will slow to 3.5 percent this year from 5.2 percent in 2000, the Organization for Economic Cooperation and Development predicts. The euro region will only slow to 3.1 percent in 2001 from 3.5 percent, OECD figures show. 95 Cents ``The outlook for the euro zone is favorable compared with the U.S.'' said Audrey Childe-Freeman, an economist at CIBC World Markets in London. ``The euro will be the best-performing currency going into the new year. Ninety-five (cents), here we go.'' Traders said they are also looking for direction from U.S. jobs and wages figures to be released Friday. ``The market is really focusing on the current data this week, with U.S. payrolls on Friday and the NAPM today, to see if there's a continuation of the slowdown we've seen toward the end of last year,'' said Karl Halligan, chief trader at CIC Bank New York. Europe's 12-nation currency has surged more than 15 percent since hitting its record low of 82.30 U.S. cents on Oct. 26, buoyed by signs the U.S. economy is cooling. Last year, U.S. economic growth exceeded expectations and attracted foreign investment to the currency, driving the dollar up 7.5 percent in 2000 when measured against a Finex index of six major currencies. It has fallen about 5 percent in the past month on that index. The dollar was also hurt as all three major U.S. stock indexes fell today, with the Nasdaq Composite index down 7.2 percent. Japan `Disappointing' The yen, meantime, fell near a 16-month low against the dollar and to a 10-month low against the euro on concern Japan's economy is lapsing into recession. Reports this month, including vehicle sales for December and housing spending for November, may support evidence the world's second-largest economy is running out of steam. The Nikkei 225 stock average posted the worst year in a decade in 2000, curbing demand for yen to buy stocks. ``Japan's economy is disappointing at such a massive level it's causing people to ratchet down expectations for growth there'' and for the yen, said Brown Brothers's Rhame. Japan's Prime Minister Yoshiro Mori said yesterday the U.S. economic slowdown and the decline in Japan's stock market are worrisome for Japan's economy. In December, business confidence waned in Japan, household spending and industrial production fell, and the jobless rate rose to a nine-month high. In other trading, the dollar fell against the British pound to $1.5007 per pound from $1.4958, against the Swiss franc to 1.6015 francs from 1.6111, and against the Canadian dollar to C$1.4937 from C$1.4978. Best Regards, J.T.