Saguaro
03-06-2008, 08:03 AM
NEW YORK (AFP) - The dollar slumped to fresh lows against the euro Wednesday as traders digested a glum assessment on the US economy in the Federal Reserve Beige Book and braced for a potentially weak report on Friday.
The euro climbed as high as 1.53 dollars, breaking its previous record of 1.5274 dollars set on Monday, at 2200 GMT trading at 1.5268 dollars against 1.5210 late Tuesday.
The greenback edged up against the yen, reaching 104.05 after 103.29 on Tuesday.
The dollar came under heavy selling pressure after the private ADP employment report showed that private sector US firms shed 23,000 jobs in February, well below expectations that around 18,000 new positions had been created.
Analysts said the report suggested that official non-farm employment figures for February, to be released Friday, could also reveal a loss of jobs by the US economy.
Kathy Lien at Forex Capital Markets said a loss of 100,000 jobs "does not seem unrealistic."
"Many people believe that the problems in the US economy today are far worse than in 2001 due to the triple blow of a housing crisis, credit crunch and skyrocketing commodity prices," Lien said.
A contracting job market, indicative of sharply slower US economic momentum, raises chances the US Federal Reserve will cut interest rates further, making the dollar far less attractive to investors than the euro.
The Fed's Beige Book meanwhile painted a picture of a US economy that is struggling on several fronts, with housing, manufacturing and retail activity losing steam.
"Two-thirds of the (Fed) districts cited softening or weakening in the pace of business activity, while others referred to subdued, slow or modest growth," the report said.
The report, to be used by Fed policymakers at a March 18 meeting, suggests more rate cuts are looming.
The Beige Book "adds to the weight of evidence that the economy is struggling with recessionary forces, while pressures in the financial markets continue to escalate," said Brian Bethune at Global Insight.
He added that his firm "is forecasting that the (Fed) will lower the target rate for federal funds by at least 50 basis points on, or before, the next meeting of the (Fed policy panel) on March 18."
The rapidly appreciating euro has been explained by some analysts as reflecting differences in strategy between the Fed, which has been easing monetary policy, and the European Central Bank, which has been holding firm in the midst of rising eurozone inflation.
The ECB is to convene on Thursday when its governors will have to wrestle with the twin threats of inflation and slumping growth, analysts predict.
A poll of 30 economists by Thomson Financial News/AFP found they all expect the ECB to leave its key lending rate unchanged at 4.0 percent, amid inflation that remained stuck at 3.2 percent in February.
The benchmark US federal funds rate is currently at 3.0 percent and Federal Reserve Chairman Ben Bernanke has signaled that it could soon be lowered further in order to spur flagging US growth.
In late New York trade, the dollar stood at 1.0362 Swiss francs from 1.0377 late Tuesday.
The pound was at 1.9925 dollars after 1.9858.
http://news.yahoo.com/s/afp/20080305/bs_afp/forexus;_ylt=AtR93UWsOtdS7UVbobpWJ1iyBhIF
The euro climbed as high as 1.53 dollars, breaking its previous record of 1.5274 dollars set on Monday, at 2200 GMT trading at 1.5268 dollars against 1.5210 late Tuesday.
The greenback edged up against the yen, reaching 104.05 after 103.29 on Tuesday.
The dollar came under heavy selling pressure after the private ADP employment report showed that private sector US firms shed 23,000 jobs in February, well below expectations that around 18,000 new positions had been created.
Analysts said the report suggested that official non-farm employment figures for February, to be released Friday, could also reveal a loss of jobs by the US economy.
Kathy Lien at Forex Capital Markets said a loss of 100,000 jobs "does not seem unrealistic."
"Many people believe that the problems in the US economy today are far worse than in 2001 due to the triple blow of a housing crisis, credit crunch and skyrocketing commodity prices," Lien said.
A contracting job market, indicative of sharply slower US economic momentum, raises chances the US Federal Reserve will cut interest rates further, making the dollar far less attractive to investors than the euro.
The Fed's Beige Book meanwhile painted a picture of a US economy that is struggling on several fronts, with housing, manufacturing and retail activity losing steam.
"Two-thirds of the (Fed) districts cited softening or weakening in the pace of business activity, while others referred to subdued, slow or modest growth," the report said.
The report, to be used by Fed policymakers at a March 18 meeting, suggests more rate cuts are looming.
The Beige Book "adds to the weight of evidence that the economy is struggling with recessionary forces, while pressures in the financial markets continue to escalate," said Brian Bethune at Global Insight.
He added that his firm "is forecasting that the (Fed) will lower the target rate for federal funds by at least 50 basis points on, or before, the next meeting of the (Fed policy panel) on March 18."
The rapidly appreciating euro has been explained by some analysts as reflecting differences in strategy between the Fed, which has been easing monetary policy, and the European Central Bank, which has been holding firm in the midst of rising eurozone inflation.
The ECB is to convene on Thursday when its governors will have to wrestle with the twin threats of inflation and slumping growth, analysts predict.
A poll of 30 economists by Thomson Financial News/AFP found they all expect the ECB to leave its key lending rate unchanged at 4.0 percent, amid inflation that remained stuck at 3.2 percent in February.
The benchmark US federal funds rate is currently at 3.0 percent and Federal Reserve Chairman Ben Bernanke has signaled that it could soon be lowered further in order to spur flagging US growth.
In late New York trade, the dollar stood at 1.0362 Swiss francs from 1.0377 late Tuesday.
The pound was at 1.9925 dollars after 1.9858.
http://news.yahoo.com/s/afp/20080305/bs_afp/forexus;_ylt=AtR93UWsOtdS7UVbobpWJ1iyBhIF