Sun, Jul 18, 2004 - Page 10 News List

Dollar tumbles against euro on weak US figures

AFP , LONDON

The dollar took a tumble here Friday, falling to a four-month low against the euro in response to weak US economic data.

The single European currency in late-day trade was at US$1.2442 against US$1.2351 late Thursday in New York.

The dollar was meanwhile trading at ¥108.73, down from ¥109.76 on Thursday.

The dollar initially fell following the release of weak US consumer price inflation numbers and then began to test lows after data from the Treasury showed a decline of almost US$20 billion in asset inflows.

The greenback lost more ground after the University of Michigan consumer sentiment data came in weaker than expected.

"Overall, confidence remains at healthy levels, but following the soft core CPI reading in June and the drop in portfolio capital inflows registered in May, the weaker-than-expected Michigan data will act as yet another blow to the dollar," said Calyon currency strategist Mitul Kotecha.

US core consumer prices -- which exclude food and energy -- rose 0.1 percent, below the consensus for a rise of 0.2 percent and slashing any remaining expectations for rapid US interest rate hikes.

Earlier, the Treasury Department said net foreign capital flows into the US declined by almost US$20 billion, to US$56.4 billion in May.

"The figure underscores concerns over potential problems with the US current account deficit," said Ray Attrill, research director at 4Cast.

Friday trio of weak data "pushed the market in the direction it wanted to go," with investors using it as an excuse to sell dollars amid the negative sentiment on the US currency, he said.

The euro rose to a high of US$1.2462 against the dollar, its highest since March, before falling back and settling around the US$1.245 level.

Analysts said the euro's rise came almost entirely on the back of dollar falls and showed little reaction to earlier EU inflation data.

The eurozone harmonized index of consumer prices rose a final 2.4 percent year-on-year in June, unchanged from the provisional estimate, but the core rate unexpectedly rose 1.9 percent after a gain of 1.8 percent in May.

Analysts said the data should keep intact the growing consensus that the European Central Bank will raise interest rates by the end of the year.

The euro was changing hands at US$1.2442 from US$1.2351 late on Thursday in New York, ¥135.29 (¥135.56), £0.6647 (£0.6631) and 1.5251 Swiss francs (Sf1.5274).

The dollar stood at ¥108.73 (¥109.76) and 1.2255 Swiss francs (Sf1.2362).

The pound was at US$1.8719 (US$1.8525), ¥203.51 (¥203.32) and 2.2941 Swiss francs (Sf2.2901).

On the London Bullion Market, the price of an ounce of gold was at US$406.30 from US$403.15 late on Thursday.

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