Sun, Oct 01, 2006 - Page 10 News List

Greenback stronger on hints of `soft landing' for the US

SLOWING GROWTH Asian fund buying and data showing anemic consumer spending growth spelled good news for the US currency


The US dollar was higher against the other major currencies on Friday on data suggesting that the US economy is enjoying a soft landing, traders said.

The single European currency bought US$1.2668 at 2100 GMT, from US$1.2699 late Thursday in New York.

The US dollar was trading at ¥118.03 from ¥117.79, on a day that Wall Street's Dow Jones share index fell just short of its record closing high of 11,722.98 reached in January 2000, closing at 11,679.07.

Friday's data showed that US consumer spending rose 0.1 percent in August from July while households' income went up a faster 0.3 percent. Analysts said this was in line with a picture of slowing economic growth.

A separate report showed the University of Michigan consumer sentiment index rising to a better-than-expected 85.4 points.

Other data from Chicago-region purchasing managers showed the area's industrial index at a surprisingly strong 62.1 points.

"The market had been nervous after the Philly Fed [survey] had signalled a slowdown in manufacturing," said Steve Barrow, currency strategist at Bear Stearns.

Analysts said the results overall were consistent with the view that the Federal Reserve will keep borrowing costs on hold for now to leave its benchmark interest rate at 5.25 percent.

Traders said the US dollar was helped by some fund buying, particularly in Asia, as the third quarter closed.

Other currencies have had problems of their own, not least the Japanese yen, which is suffering from the portfolio changes.

The euro also encountered headwinds after inflation in the 12-nation European single currency zone dropped to an annual rate of 1.8 percent from 2.3 percent in August.

Though eurozone inflation fell sharply last month, coming into line with the European Central Bank's target for the first time since January last year, analysts said the ECB was still on course to raise rates.

They expected the bank to lift its key refi rate another quarter point to 3.25 percent next Thursday, especially after a surprising rise in economic sentiment in the eurozone.

The pound bought US$1.8722 at 2100 GMT, from US$1.8762 late Thursday.

The US dollar was worth 1.2503 Swiss francs (1.2473).

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