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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: westpacific who wrote (16251)	7/7/2004 11:40:59 AM
From: Jim Willie CB	Respond to of 110194

Dollar at 3-Month Low Against Euro Wednesday July 7, 10:20 am ET By Manuela Badawy NEW YORK (Reuters) - The dollar hit a three-month low against the euro on Wednesday as economic data added to expectations that the Fed might not need to take an aggressive stance in any future hikes of U.S. interest rates. Slower rises in U.S. interest rates, which the Fed increased last week for the first time in four years, diminish the allure of dollar-based assets for global investors. A key survey of the U.S. service sector came out weaker than expected on Tuesday, intensifying worries sparked last week by disappointing U.S. payrolls data and the Federal Reserve's insistence on a "measured" pace of future tightening. "The overwhelming theme of the softness of the dollar was determined last week with a softer FOMC statement and the softer non-farm payrolls data that we saw on Friday," said Joe Francomano, vice president of foreign exchange, Erste Bank in New York. "Prior to those two events, the markets have been very quiet and were trading in ranges and we are looking for fundamental impetus as far as determining the future direction of the dollar," he said. By midmorning in New York, the euro rose 0.6 percent to $1.2375 just below session highs of $1.2378 (EUR=), its highest level since early April. Analysts said its rise accelerated when the euro broke a key resistance level on technical charts around $1.2350, bringing it within six cents of record highs set at $1.2927 in February. "We have had very little data today and the market is focusing on technicals," said Tom Vosa, market economist at National Australia Bank in London. "The broader picture is that the Fed is expected to be measured." Traders will now be on the lookout for any comments on the state of the U.S. economy from Fed Vice Chairman Roger Ferguson, who is due to speak at around 1 p.m. EDT (1700 GMT) before the New York Association for Business Economics. The dollar fell against the Swiss franc (CHF=) to come within a whisker of lows not seen since February, trading just above 1.2267 francs. At the same time, investors were turning to higher-yielding currencies such as the Australian and New Zealand dollars and the British pound, hoping to benefit from their more lucrative interest rate returns. The Australian dollar (AUD=) hit a two-month high above 72 U.S. cents, rallying even as Australia's central bank left its key interest rate unchanged at 5.25 percent. Weaker-than-expected U.S. services data, on top of last week's lackluster U.S. payrolls numbers, have seen Australian bond yield spreads widen against the United States, dimming demand for U.S. bond investments. Sterling also rose above $1.8500 (GBP=) even though the Bank of England Monetary Policy Committee is widely expected to leave interest rates on hold at the end of its two-day meeting on Thursday. Many analysts expect it to raise rates from the current 4.5 percent in August, following four hikes since November. The euro shrugged off a downgrade of Italy's long-term sovereign credit rating by Standard and Poor's on Wednesday. Traders said the market is more focused on the slower pace of U.S. growth than the European Union's fiscal woes. The dollar shed 0.8 percent to 108.55 yen, falling briefly to 108.31 (JPY=) as the outlook for the U.S. economy outweighed questions about Sunday's elections in Japan. The prospects of a weak showing by the ruling LDP party of Prime Minister Junichiro Koizumi have hurt the yen in recent sessions as investors fretted about the future pace of economic reforms.