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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: sciAticA errAticA who wrote (32708)	4/30/2003 8:14:53 AM
From: sciAticA errAticA	Read Replies (1) \| Respond to of 74559

Dollar Falls to Four-Year Low on Manufacturing, Jobs Concern By Monee Fields-White New York, April 30 (Bloomberg) -- The dollar fell to its lowest level against the euro in more than four years as traders speculated reports this week will show U.S. manufacturing shrank as the world's biggest economy shed jobs this month. Concern about the economy, the current account and budget deficits, and interest rates lower than in Europe ensure the dollar won't recover soon, investors said. Federal Reserve Chairman Alan Greenspan today will tell members of Congress whether he still expects growth to accelerate now that the Iraq war is over. ``There are important numbers coming and I'd expect the dollar to continue its trend lower,'' said Matthew Tatnell, who helps oversee the equivalent of $173 billion at Morley Fund Management. ``With investors buying yield and the problem with the deficits, there's no good news on the dollar's fundamental problems.'' He expects the dollar to trade at $1.14 at year-end. The dollar traded to $1.1124 per euro at 7:30 a.m. in New York from $1.1083 yesterday. Earlier, it weakened to $1.1148, the lowest value since Feb. 19, 1999, and is headed for a ninth consecutive monthly loss against the euro. The dollar shed has 5.6 percent against the euro this year and 19 percent in the past year. It fell to 119.51 yen from 120.09 late yesterday. Concern the U.S. job market isn't improving overshadowed a report yesterday that showed consumer confidence jumped the most in 12 years this month, analysts said. Fed Rates Signs the economy isn't recovering may boost expectations the Federal Reserve will lower its interest-rate target from a 41-year low of 1.25 percent in coming months, cutting returns on dollar- denominated deposits. The benchmark lending rate in Europe is 2.5 percent. ``After the end of the war in Iraq, people were too optimistic'' about the U.S. economic outlook, said Sabrina Jacobs, a currency strategist at Dresdner Bank AG in Frankfurt. ``Investors are going to have to reassess that view'' and realize the economy's prospects are dim. Dresdner expects the Fed to pare its main rate by a half-percentage point in June, weighing on the dollar, she said. Greenspan's testimony to the House Financial Services Committee at 10 a.m. Washington time will give investors, consumers, and corporate executives an important clue to the direction of interest rates. Current Account Deficit A faltering recovery makes it harder for the U.S. to attract the $1.5 billion a day needed to offset the record deficit in its current account, the broadest measure of international trade, and maintain the dollar's value. Both Japan and the 12-nation euro region have current account surpluses. The economy ``needs to grow a lot faster to fund that deficit,'' Chris Loong, a manager of foreign exchange hedging at AMP Global Investors in Sydney, told Bloomberg Television. ``It's a big part of why the dollar is weakening, and we expect it to weaken further'' to $1.15 per euro by the end of the year. AMP Global has about $155 billion under management. The current account gap widened to $136.9 billion in the last quarter of 2002, or 5.2 percent of gross domestic product. The yen briefly pared gains after the Bank of Japan raised the target for reserves it makes available to lenders and other financial institutions. The change suggested the bank will put more cash into the financial system, diluting the yen's value. The bank raised its target to between 22 trillion yen ($184 billion) and 27 trillion yen from a maximum of 22 trillion yen. It kept monthly government bond purchases at 1.2 trillion yen. The central bank's move ``is mildly positive for the dollar in that this policy is designed to add more capital to the domestic economy,'' said Robert Rennie, a currency strategist at Westpac Banking Corp. in Sydney. Factory, Employment Reports The Institute for Supply Management's factory index will probably show a reading of less than 50 in April, indicating U.S. manufacturing is shrinking, according to economists surveyed by Bloomberg News. The unemployment rate probably rose to 5.9 percent, close to an eight-year high of 6 percent, while the nation shed 58,000 jobs in April, economists predict reports Friday will show. A ninth declining month against the euro would be the dollar's longest losing streak since a 10-month drop against the deutsche mark ended in October 1994. ``The outlook is not very positive for the dollar,'' said Naomi Fink, a Singapore-based currency strategist at UBS Warburg LLC, the second-largest trader in the $1.2 trillion-a-day foreign exchange market. The jobless report ``should keep the pressure on the dollar versus the euro.'' Last Updated: April 30, 2003 07:43 EDT quote.bloomberg.com