Sun, Sep 28, 2003 - Page 10 News List

Traders anticipate increased pressure on the greenback

AFP , LONDON AND NEW YORK

The dollar shed some earlier gains in late trade Friday following a disappointing report on the state of US consumer confidence, analysts said.

The single European currency stood at US$1.1481 against US$1.1499 late on Thursday in New York.

The dollar was being traded at ¥111.75 compared with ¥112.05 on Thursday.

The weakening in the dollar came amid signs that US consumers are growing more sceptical about their economic prospects, according to the University of Michigan.

The university's revised consumer sentiment index for September fell to 87.7 from 89.3 last month and the 88.2 preliminary September reading.

Economists had been expecting the index to strengthen slightly.

Subsidiary measures also fell; the current conditions index falling to 98.4 in September from 99.7 in August and 98.9 in early September, while the expectations index fell to 80.8 from August's 82.5 and 81.3 earlier this month.

The disappointing news on the consumer confidence front was enough to eliminate earlier gains prompted by an upgrade of second-quarter growth figures to 3.3 percent from the earlier prediction of 3.1 percent.

Elsewhere, there was little going on, with light business, particularly in New York, ahead of the Jewish New Year.

"It's been very lethargic and rangebound," said David Mann, forex strategist at Standard Chartered.

There had also been some anticipation of Japanese intervention but nothing materialized.

In general, most market participants were anticipating renewed pressure on the dollar, though earlier expectations of a crash seemed to be diminishing.

"Calls for the dollar to crash simply because of the large US current account deficit are unconvincing in my view," said Morgan Stanley currency strategist Stephen Jen.

"Unless all of the policymakers in the world make a severe mistake in forcing a crash in the dollar, the dollar will continue to decline gradually."

Robert Sinche at Citibank said the market was still trying to sort out the meaning of last weekend's G7 communique, which in a departure from trend called for more "flexible" exchange rates.

"Unless one concludes that there is an agreement to aggressively weaken the dollar, which we do not, our valuation measures suggest that dollar weakness has been extended about as far as it will go," he said.

"Once markets begin to refocus on sustainable forces, rather than unwarranted conclusions about a `weak dollar' policy orientation, we expect the dollar to begin a gradual cyclical recovery into early 2004."

The euro was changing hands at US$1.1481 from US$1.1499 late on Thursday in New York, ¥128.29 (¥128.89), £0.6921 (£0.6920) and 1.5424 Swiss francs from Sf1.5534.

The dollar was being quoted at ¥111.75 (¥112.05) and 1.3437 Swiss francs (Sf1.3422).

The pound was at US$1.6587 (US$1.6608), ¥185.33 (¥186.09) and traded at 2.2289 Swiss francs (Sf2.2294).

On the London Bullion Market, the price of an ounce of gold tumbled to US$382.70 from US$390.70 on Thursday afternoon.

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