Gold9472
05-01-2007, 08:40 AM
Dollar Trades Near Record Low Versus Euro Before U.S. Reports
http://www.bloomberg.com/apps/news?pid=20601085&sid=aWtJV3mcTg6E&refer=europe
By Anchalee Worrachate and Kosuke Goto
May 1 (Bloomberg) -- The dollar traded near a record low against the euro before housing and manufacturing figures in the U.S. that may add to signs the world's largest economy is slowing.
The gap between U.S. and European 10-year debt yields has narrowed to the least in 2 1/2 years since the Federal Reserve stopped raising interest rates last year and the European Central Bank began raising them. Federal Reserve Bank of San Francisco President Janet Yellen last week said housing remains a drag on the U.S. economy, which grew at a "crawl" in the first quarter.
"We remain bearish on the dollar in the near-term," said Daragh Maher, senior currency strategist at Calyon in London. "We are cautious about the U.S. economic outlook, in terms of activity and the risks from the housing sectors."
The dollar traded at $1.3645 per euro at 7:07 a.m. in New York, near the record low of $1.3681 set April 27. It was at 119.58 yen from 119.52 in New York yesterday. Maher said the euro may rise to $1.37 in coming weeks.
The yield gap between 10-year U.S. and 10-year European debt shrank to 49 basis points from 1.30 basis points on June 29, 2006. That's close to 2 1/2-year low of 46 basis points reached last week.
The U.S. dollar fell to an all-time low of 78.90 against the currencies of seven major trading partners yesterday, according to a Fed index published on its Web site. The heaviest weight in the index is from the euro area, followed by Canada, Japan, the U.K., Switzerland, Australia and Sweden.
Trading may be subdued today, with markets closed in China, South Korea, Hong Kong and Singapore. Markets in all countries that share the euro have national holidays today, except Ireland.
"A lot of Asia is closed and Europe's closed, so it feels like a market unwilling to push the boundaries," said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. The dollar may reach $1.3630 per euro and 119.30 yen, Gibbs said.
Weak Data
The dollar may extend a three-month slide versus the euro as the National Association of Realtors' will say its index of signed purchase agreements rose 0.1 percent in March, compared with a 0.7 percent increase the previous month, according to forecasts by economists. The report is scheduled to be released at 10 a.m. in Washington.
A weak reading will add to concern about a slowdown in the economy. A report yesterday showed consumer spending slowed in March. Purchases gained 0.3 percent from the prior month, less than half the 0.7 percent increase in incomes and falling short of the average estimate of 0.5 percent.
The slowdown may also weigh on manufacturing, which was probably little changed in April, economists expect an ISM report to show at 10 a.m. New York time. The manufacturing index edged up to 51, from 50.9 in March, according to the median of 73 forecasts in a Bloomberg News survey. Readings of 50 are the dividing line between expansion and contraction.
`Vulnerable' Dollar
"The dollar seems vulnerable to further weakness in the near term," Frida Gjorstrup, currency strategist at JPMorgan Chase Bank in London.
Interest-rate futures today showed traders see a 30 percent chance the Fed will cut borrowing costs by August, up from 22 percent on April 27. The Fed's benchmark interest rate of 5.25 percent compares with the European Central Bank's 3.75 percent and the Bank of Japan's 0.5 percent, the lowest among major economies.
The euro also traded near a record high against the yen as signs of a strengthening economy may prompt traders to place more bets the ECB will keep raising rates this year. The euro reached 163.30 yen today, just below a record high of 163.32, before easing to 163.20.
Any advance in the euro may be limited by speculation on traders selling to protect options with a knock-out at $1.37. A knock-out is a barrier that renders an option worthless should it be triggered. Traders use it to reduce the premium paid for a currency option.
"Defensive selling around $1.37 is likely to put a firm cap on any euro gains in the short term," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. The currency may trade between $1.36 and $1.37 today, he said.
Interest-rate futures indicate investors are betting the ECB will probably raise borrowing costs twice more this year. The yield on the December futures contract was at 4.32 percent.
http://www.bloomberg.com/apps/news?pid=20601085&sid=aWtJV3mcTg6E&refer=europe
By Anchalee Worrachate and Kosuke Goto
May 1 (Bloomberg) -- The dollar traded near a record low against the euro before housing and manufacturing figures in the U.S. that may add to signs the world's largest economy is slowing.
The gap between U.S. and European 10-year debt yields has narrowed to the least in 2 1/2 years since the Federal Reserve stopped raising interest rates last year and the European Central Bank began raising them. Federal Reserve Bank of San Francisco President Janet Yellen last week said housing remains a drag on the U.S. economy, which grew at a "crawl" in the first quarter.
"We remain bearish on the dollar in the near-term," said Daragh Maher, senior currency strategist at Calyon in London. "We are cautious about the U.S. economic outlook, in terms of activity and the risks from the housing sectors."
The dollar traded at $1.3645 per euro at 7:07 a.m. in New York, near the record low of $1.3681 set April 27. It was at 119.58 yen from 119.52 in New York yesterday. Maher said the euro may rise to $1.37 in coming weeks.
The yield gap between 10-year U.S. and 10-year European debt shrank to 49 basis points from 1.30 basis points on June 29, 2006. That's close to 2 1/2-year low of 46 basis points reached last week.
The U.S. dollar fell to an all-time low of 78.90 against the currencies of seven major trading partners yesterday, according to a Fed index published on its Web site. The heaviest weight in the index is from the euro area, followed by Canada, Japan, the U.K., Switzerland, Australia and Sweden.
Trading may be subdued today, with markets closed in China, South Korea, Hong Kong and Singapore. Markets in all countries that share the euro have national holidays today, except Ireland.
"A lot of Asia is closed and Europe's closed, so it feels like a market unwilling to push the boundaries," said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. The dollar may reach $1.3630 per euro and 119.30 yen, Gibbs said.
Weak Data
The dollar may extend a three-month slide versus the euro as the National Association of Realtors' will say its index of signed purchase agreements rose 0.1 percent in March, compared with a 0.7 percent increase the previous month, according to forecasts by economists. The report is scheduled to be released at 10 a.m. in Washington.
A weak reading will add to concern about a slowdown in the economy. A report yesterday showed consumer spending slowed in March. Purchases gained 0.3 percent from the prior month, less than half the 0.7 percent increase in incomes and falling short of the average estimate of 0.5 percent.
The slowdown may also weigh on manufacturing, which was probably little changed in April, economists expect an ISM report to show at 10 a.m. New York time. The manufacturing index edged up to 51, from 50.9 in March, according to the median of 73 forecasts in a Bloomberg News survey. Readings of 50 are the dividing line between expansion and contraction.
`Vulnerable' Dollar
"The dollar seems vulnerable to further weakness in the near term," Frida Gjorstrup, currency strategist at JPMorgan Chase Bank in London.
Interest-rate futures today showed traders see a 30 percent chance the Fed will cut borrowing costs by August, up from 22 percent on April 27. The Fed's benchmark interest rate of 5.25 percent compares with the European Central Bank's 3.75 percent and the Bank of Japan's 0.5 percent, the lowest among major economies.
The euro also traded near a record high against the yen as signs of a strengthening economy may prompt traders to place more bets the ECB will keep raising rates this year. The euro reached 163.30 yen today, just below a record high of 163.32, before easing to 163.20.
Any advance in the euro may be limited by speculation on traders selling to protect options with a knock-out at $1.37. A knock-out is a barrier that renders an option worthless should it be triggered. Traders use it to reduce the premium paid for a currency option.
"Defensive selling around $1.37 is likely to put a firm cap on any euro gains in the short term," said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. The currency may trade between $1.36 and $1.37 today, he said.
Interest-rate futures indicate investors are betting the ECB will probably raise borrowing costs twice more this year. The yield on the December futures contract was at 4.32 percent.