Sun, Feb 18, 2007 - Page 5 News List

US dollar settles after a series of uncertain sessions

AFP AND CNA , NEW YORK AND TAIPEI

The ailing US dollar stabilized on Friday following three rocky sessions, as currency traders shook off weak US economic data and the greenback saw some relief from a big global merger announcement.

The euro, meanwhile, edged up to US$1.3142 at 10pm after US$1.3139 late on Thursday in New York.

The US dollar rose against the New Taiwan dollar on Friday, gaining NT$0.085 to close at NT$32.993.

A total of US$897 million changed hands during the day's trading.

The US dollar opened at NT$32.908, before fluctuating between a high of NT$32.821 and a low of NT$33.000.

The US dollar also firmed slightly to ¥119.37 on Friday from ¥119.18 on Thursday.

PRODUCER PRICE INDEX

The US producer price index, which measures inflation at the wholesale level, fell 0.6 percent last month, the largest monthly fall since October.

Meanwhile, a separate report showed US housing starts slid 14.3 percent last month to a seasonally adjusted 1.408 million units, marking the lowest level in more than nine years.

Both reports suggested the Federal Reserve is unlikely to hike interest rates soon, and if the weakness persists it could lead to rate cuts.

"Wholesale price pressures continue to ebb on fizzling energy costs and intense global competition," BMO Financial economist Sal Guatieri said.

"This will bolster the Fed's confidence that inflation pressures are on the wane, setting the stage for a rate cut later this year," he said.

REPRIEVE

Some analysts said that the greenback got a reprieve when BBVA bank, the second-biggest Spanish bank, reached an agreement to buy Texas-based US bank Compass Bancshares for US$9.6 billion.

A giant deal will bolster demand for dollars, driving up the value of the greenback, at least temporarily.

"Despite this [soft economic] data, the dollar was somewhat buoyed by merger and acquisition activity as the Spanish bank BBVA announced it is buying US Compass Bancshares," PNC Bank's Hilary Love said.

`WEAKER BIAS'

But she added that "with recent weaker-than-expected data, the markets are now assigning about a 20 percent probability of the Federal Reserve easing by July of this year. The dollar will continue to have a weaker bias unless the data starts coming out on the strong side."

In late New York trade, the dollar stood at 1.2353 Swiss francs after SF1.2346 on Thursday.

The pound was being traded at US$1.9495 from US$1.9513 late on Thursday.

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