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Dollar continues to lose against euro after fresh doubts

The euro gained against the US dollar on Friday, heading up above 1.18-dollar mark again as weak US economic data sparked speculation of a fresh interest rate cut by the US Federal Reserve.

The single European currency climbed to US$1.1828 from US$1.1764 late on Thursday in New York.

The dollar was at ¥117.47 from ¥117.63 on Thursday.

Faith in a much-vaunted post-Iraq war recovery in the US economy was dealt a fresh blow with the publication of data signaling waning consumer confidence, in turn solidifying US rate cut hopes, analysts said.

"The data makes a US rate cut more likely," said Standard Chartered analyst Julian Jessop.

Consumer sentiment in the US weakened this month after two months of solid gains, widely watched data showed.

The University of Michigan's consumer sentiment index fell to 87.2 points from 92.1 last month, confounding expectations of a slight improvement to 93.7.

Bear Sterns economists said in a research note in the wake of the report that the futures market for so-called Fed funds was pricing in a 40 basis point easing of monetary policy at the Federal Reserve's meeting on June 25.

This can be interpreted as a "certain expectation that the Fed will cut rates by a quarter point and a 60 percent probability that the rate cut will be 50 basis points," they said.

But despite the fall in consumer sentiment, confidence remains well above the average levels of the fourth quarter of last year and the first quarter of this year, they added.

"Though disappointing, the 4.9-point drop in sentiment in early June needs to be compared to the 14.5-point increase over the prior two months," they added.

There was more US data during the afternoon but their impact was muted.

The US trade deficit narrowed to US$42 billion in April from a revised US$42.9 billion in March -- in line with market expectations. Also, headline US producer price index for finished goods fell 0.3 percent last month from the previous month, fueling concerns about deflation.

The euro was changing hands at US$1.1828 from US$1.1764 late on Thursday in New York, ¥138.38, £0.7089 and 1.5428 Swiss francs.

The dollar was being quoted at ¥117.47 and 1.3043 Swiss francs.

The pound was at US$1.6685, ¥195.97 and 2.1772 Swiss francs.

On the London Bullion Market, the price of gold stood at US$353.05 an ounce from US$352.25 on Thursday.
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