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Daily Analysis

Dollar trading at a three week low before the employment release

Wed, Jul 2 2008, 10:14 GMT
by Benny Menashe

Finotec Group Inc.

The dollar traded near a three-week low against the euro before an industry report today that economists predict will show U.S. companies cut jobs in June for the first time in four months. The U.S. currency also traded near a three-week low versus the yen before government data tomorrow that may show employers in the world's biggest economy reduced staff numbers for a sixth straight month, prompting traders to pare bets the Federal Reserve will raise interest rates. ``Buying the dollar now seems to be the wrong move,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Weak numbers from the labor market are sure to push the dollar lower. You can't deny that there are sufficient reasons to worry that the U.S. economy will slow.'' The dollar is currently trading at $1.5826 per euro as of 7:46 am, GMT from $1.5793 yesterday.

The ECB will boost its benchmark rate a quarter-percentage point to 4.25 percent, according to 57 of 58 economists surveyed by Bloomberg News. ECB executive council member Lorenzo Bini Smaghi said yesterday the bank's inflation-fighting mandate means it acts faster than the U.S. Fed. President Jean-Claude Trichet said June 25 that the ECB is ``in a state of heightened alertness'' on prices. The ECB has kept its benchmark rate at 4 percent since June of last year. The Fed lowered rates seven times between September and April, to 2 percent from 5.25 percent.

Yen sales by Japanese individual investors on the Tokyo Financial Exchange reached the highest since August yesterday as they bet the currency will extend its worst quarterly loss against the U.S. dollar since December 2001. Members of the public including pensioners and businessmen accelerated purchases of foreign currencies as this week's gain in Japan's currency provided an opportunity to buy higher-yielding assets in Australia and New Zealand at cheaper levels. The highest yen sales in almost 11 months came as a Bank of Japan business confidence survey raised speculation the central bank will need to keep its benchmark interest rate at 0.5 percent this year. The USD/JPY is currently trading at 106.28 as of 8:09 am, GMT.

Today's Economic Events

Published on  Wed, Jul 2 2008, 10:17 GMT

Archive

• U.S Dollar falls on speculation that consumer spending slowed
  Published On Fri, Aug 29 2008, 12:19 GMT
• Euro Rises on presumptions that Trichet won't lower rates
  Published On Thu, Aug 28 2008, 11:00 GMT
• Dollar down on speculation over US data
  Published On Wed, Aug 27 2008, 10:26 GMT
• The Dollar's rise not over yet says Lehman
  Published On Tue, Aug 26 2008, 10:59 GMT
• Dollar rises as crude oil declines on low demand
  Published On Mon, Aug 25 2008, 11:38 GMT

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