WORLD FOREX: Dollar Remains Stronger On Recovery Concerns
NEW YORK (Dow Jones)--The dollar remains stronger late Thursday morning as U.S. stocks slipped and disappointing U.S. economic data added to concerns over a global economic recovery.
The Institute for Supply Management, a private research group, reported Thursday that the U.S. manufacturing activity expanded more slowly last month than economists expected.
The ISM index of manufacturing activity moved to 52.6 in September, remaining above the key level of 50, anything above which indicates expansion. But September's reading was below the 54.0 figure expected by economists polled by Dow Jones Newswires.
Earlier Thursday, modest gains in U.S. personal income and spending were offset by a worse-than-expected weekly jobless report, leading the euro to hit an intraday low against the dollar before retracing some of its losses by late morning. The common currency remained down on the dollar for the day. The Dow Jones Industrial Average had slipped more than 140 points by late morning in New York.
Overnight comments by an E.U. official had sparked a euro decline, as E.U. Economic and Monetary Affairs Commissioner Joaquin Almunia said the euro group will be discussing the euro's appreciation to prepare its position ahead of the G-7 meeting in Istanbul this weekend.
That prompted a sharp sell-off, pushing the euro back under $1.46.
"Data from the euro zone continues to confirm that the economies have bottomed, but that the recovery is fragile and that the consumer is still under the pressure of rising unemployment," said Camilla Sutton, currency strategist at Scotia Capital in Toronto.
Late morning, the euro was at $1.4527 from $1.4636 late Wednesday. The dollar was at Y89.62 from Y89.75. The euro was at Y130.27 from Y131.36. The U.K. pound was at $1.5972 from $1.5990, while the dollar was at CHF1.0430 from CHF1.0369.
Currencies are likely to continue trading in tight ranges for the rest of the New York session as markets wait for Friday's September non-farm payrolls number, considered a key indicator of economic health. The payrolls number is expected to improve, but a disappointment could spook the market.
The market is "nervous" ahead of the week's remaining data, especially considering Wednesday's disappointments, Sutton said.
Meanwhile, the Brazilian real continued to show strength, though it was off its 12-month high against the dollar hit Wednesday. The dollar traded recently at BRL1.7767, from opening at BRL1.7720.
Brazil announced Thursday its foreign trade surplus narrowed in September as imports gained ground amid an expanding economy.
The Brazilian Central Bank also may increase its benchmark Selic interest rate before the end of 2009 to eliminate any inflation risks, local newspaper Folha de Sao Paulo reported Thursday.
According to the newspaper, Central Bank President Henrique Meirelles told Brazilian President Luiz Inacio Lula da Silva this week that an early rate hike might be necessary to make sure inflationary pressures don't get in the way of Brazil's 2010 economic recovery. The newspaper cited unnamed sources in its report.
Contacted by Dow Jones Newswires, central bank and presidential press officers made no comment on the report.
A signal that its central bank may increase key interest rates fuels investors funneling into the real just as much as Brazil's strong economy, said Stuart Bennett, senior currency strategist at Calyon in London.
Separately, U.S. Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that the dollar's status as a global reserve currency isn't at risk in the near term, but warned that could change if fiscal deficits aren't brought under control.
When asked during Congressional testimony about comments by World Bank President Robert Zoellick that the dollar will face increasing competition as a reserve currency, Bernanke said he agrees with two points.
He agreed with Zoellick that "there's no immediate risk to the dollar, it's a relatively long-term issue," Bernanke said.
"I also agree with him, though, that if we don't get our macro [economic] house in order that that will put the dollar in danger, and that the most critical element there is long-term fiscal stability," he said.
(Rogerio Jelmayer in Sao Paulo and Tom Barkley and Maya Jackson Randall in Waashington contributed to this article.)
-By Bradley Davis, Dow Jones Newswires; (212) 416-2654; bradley.davis@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=6adYHPR%2BcBp1XAN9MyupeA%3D%3D. You can use this link on the day this article is published and the following day.
The Institute for Supply Management, a private research group, reported Thursday that the U.S. manufacturing activity expanded more slowly last month than economists expected.
The ISM index of manufacturing activity moved to 52.6 in September, remaining above the key level of 50, anything above which indicates expansion. But September's reading was below the 54.0 figure expected by economists polled by Dow Jones Newswires.
Earlier Thursday, modest gains in U.S. personal income and spending were offset by a worse-than-expected weekly jobless report, leading the euro to hit an intraday low against the dollar before retracing some of its losses by late morning. The common currency remained down on the dollar for the day. The Dow Jones Industrial Average had slipped more than 140 points by late morning in New York.
Overnight comments by an E.U. official had sparked a euro decline, as E.U. Economic and Monetary Affairs Commissioner Joaquin Almunia said the euro group will be discussing the euro's appreciation to prepare its position ahead of the G-7 meeting in Istanbul this weekend.
That prompted a sharp sell-off, pushing the euro back under $1.46.
"Data from the euro zone continues to confirm that the economies have bottomed, but that the recovery is fragile and that the consumer is still under the pressure of rising unemployment," said Camilla Sutton, currency strategist at Scotia Capital in Toronto.
Late morning, the euro was at $1.4527 from $1.4636 late Wednesday. The dollar was at Y89.62 from Y89.75. The euro was at Y130.27 from Y131.36. The U.K. pound was at $1.5972 from $1.5990, while the dollar was at CHF1.0430 from CHF1.0369.
Currencies are likely to continue trading in tight ranges for the rest of the New York session as markets wait for Friday's September non-farm payrolls number, considered a key indicator of economic health. The payrolls number is expected to improve, but a disappointment could spook the market.
The market is "nervous" ahead of the week's remaining data, especially considering Wednesday's disappointments, Sutton said.
Meanwhile, the Brazilian real continued to show strength, though it was off its 12-month high against the dollar hit Wednesday. The dollar traded recently at BRL1.7767, from opening at BRL1.7720.
Brazil announced Thursday its foreign trade surplus narrowed in September as imports gained ground amid an expanding economy.
The Brazilian Central Bank also may increase its benchmark Selic interest rate before the end of 2009 to eliminate any inflation risks, local newspaper Folha de Sao Paulo reported Thursday.
According to the newspaper, Central Bank President Henrique Meirelles told Brazilian President Luiz Inacio Lula da Silva this week that an early rate hike might be necessary to make sure inflationary pressures don't get in the way of Brazil's 2010 economic recovery. The newspaper cited unnamed sources in its report.
Contacted by Dow Jones Newswires, central bank and presidential press officers made no comment on the report.
A signal that its central bank may increase key interest rates fuels investors funneling into the real just as much as Brazil's strong economy, said Stuart Bennett, senior currency strategist at Calyon in London.
Separately, U.S. Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that the dollar's status as a global reserve currency isn't at risk in the near term, but warned that could change if fiscal deficits aren't brought under control.
When asked during Congressional testimony about comments by World Bank President Robert Zoellick that the dollar will face increasing competition as a reserve currency, Bernanke said he agrees with two points.
He agreed with Zoellick that "there's no immediate risk to the dollar, it's a relatively long-term issue," Bernanke said.
"I also agree with him, though, that if we don't get our macro [economic] house in order that that will put the dollar in danger, and that the most critical element there is long-term fiscal stability," he said.
(Rogerio Jelmayer in Sao Paulo and Tom Barkley and Maya Jackson Randall in Waashington contributed to this article.)
-By Bradley Davis, Dow Jones Newswires; (212) 416-2654; bradley.davis@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=6adYHPR%2BcBp1XAN9MyupeA%3D%3D. You can use this link on the day this article is published and the following day.
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