Sun, Aug 03, 2003 - Page 10 News List

US manufacturing data helps raiders gain on greenback

AFP , LONDON

Disappointing US labor market data helped prompt some profit taking on the dollar in late London trading on Friday, analysts said.

The single European currency was at US$1.1257 from US$1.1233 late on Thursday in New York.

The dollar stood at ¥119.98 against ¥120.49 on Thursday.

"We hit such big resistance levels on euro/dollar and dollar/yen that you would need something unambiguously strong to break through -- and that's not what we got today," said Aziz McMahon, currency strategist at ABN Amro.

The dollar's drop came after the US reported a fall of 44,000 in non-farm payrolls in July, against forecasts of a 13,000 rise.

The US manufacturing purchasing manager index also proved disappointing to the market this afternoon, after the Chicago PMI came in much stronger than expected yesterday.

The Institute of Supply Management's manufacturing PMI rose to 51.8, its highest reading since January. This level indicates an expansion in overall activity.

Yet the market was hoping for 53.0, analysts said.

As a result, traders "have just taken a bit of profit, and gone home for the weekend," said Neil Mellor, currency strategist at Bank of New York.

Still, the dollar has not sold off much, and the overall bullish sentiment appears to be in place for the moment, Mellor said.

"A lot of bulls will take heart from the fact that employment is a lagging indicator," Mellor said.

Some economists also pointed to rays of hope in the July jobs report.

Temporary jobs rose 42,000, bringing the total rise in temp jobs in the past three months to 122,000 -- the biggest since the data began in 1990, noted Ian Shepherdson at High Frequency Economics.

"Usually, big swings in temp jobs lead overall employment by a few months, so this is a powerful positive signal," Shepherdson said.

The euro will not be seeing US$1.15 again for the coming week at least, analysts concluded.

As is often the case, the pound lost ground against the euro in tandem with the dollar, as the euro is trading back above £0.70.

Next week brings the service-sector PMIs, which are also expected to show gains for the US, euro area, and Britain. The global reflation story should continue to support the dollar, analysts said.

"What's good for global growth just now is good for the dollar, even if that good news comes from the Eurozone," said Anne Mills at Brown Brothers Harriman.

The euro was changing hands at US$1.1257 from US$1.1233 late on Thursday in New York, ¥135.07 (¥135.50), £0.7011 (£0.6976) and 1.5382 Swiss francs (Sf1.5383).

The dollar was being quoted at ¥119.98 (¥120.49) and 1.3671 Swiss francs (Sf1.3697).

The pound was at US$1.6053 (US$1.6101), ¥192.62 (¥194.00) and 2.1939 Swiss francs (Sf2.2058).

On the London Bullion Market, the price of a single ounce of gold stood at US$352.35 from US$354.75 on late Thursday afternoon.

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