Dollar Slips vs. Euro - Hewison on MarketWatch

Dollar slips vs. euro, sterling; steady vs. yen

Greenback touches another record low against euro

By Lisa Twaronite, MarketClub
Last Update: 4:21 PM ET Nov 2, 2007

SAN FRANCISCO (MarketWatch) -- The dollar was lower against most of its major counterparts and touched a new euro low despite Friday's stronger-than-expected employment data, as continuing concerns about the U.S. financial sector weighted on the greenback.

The euro was trading at $1.4515, up from $1.4432 in late U.S. trading Thursday.

Earlier in the session, the European unit rose to $1.4527, a fresh high since the euro began trading in January 1999.

"As a trader you have to be long euros short dollars with a close like this on the weekend. Many traders are looking for the other shoe to drop in regards to losses" in structured investment vehicles and collateralized debt obligations, said Adam Hewison, president of, a technical analysis Web site.

"The euro/dollar is very close to our primary target of $1.4550," he added.

The pound sterling was trading at $2.0889, up from $2.0789 Thursday.

The dollar index, which measures the greenback against a basket of currencies, was down about 0.4% at 76.295. Earlier, the index touched a low of 76.242, which was its lowest level since the index was first compiled in 1973.

But the dollar was higher against its Japanese counterpart, buying 114.89 yen compared with 114.61 late Thursday.

Date from the Labor Department early Friday showed U.S. economy created 166,000 jobs in October, which was the best job growth since May and beat the 93,000 expected by economists surveyed by MarketWatch.

Some analysts said that the upbeat data increased rather than alleviated the pressure on the dollar.

"The payroll report is supportive for risk appetite, and therefore dollar-negative. It doesn't materially change [the] outlook for monetary policy, but does suggest growth hasn't faller off a cliff," said Steve Pearson, currency strategist in London for the Bank of Scotland Treasury Services.

A separate set of data from the Commerce Department indicated orders for U.S.-made factor goods rose 0.2% in September on higher gasoline prices. The headline figure also beat economists' consensus expectation of a 0.7% decline.

U.S. stocks shed early gains and sent investors scurrying into the perceived safety of fixed-income assets, but then seesawed between positive and negative territory in afternoon trading before closing higher.

A Wall Street Journal report the Merrill Lynch & Co. had engaged in deals with hedge funds to delay when it has to record losses on risky mortgage-backed securities heightened investors' worries about the financial sector. Merrill later denied the report.

Late int he session, Dow Jones reported that Citigroup, Inc. board members are expected to gather for an emergency meeting this weekend, citing two people familiar with the matter. It wasn't immediately clear what the meeting would address, but the subject of further write-downs could come up, the report said.

Carry trades weigh on yen

Japan's currency remained under pressure due to interest rate differentials.

At 0.5%, Japan's benchmark is the lowest in the developed world. The makes it popular for carry trades, in which global investors borrow lower-yielding currencies to invest in high-yielding assets.

Before the meltdown of the U.S. subprime mortgage market, many analysts had expected Japan's central bank to raise rates in August, with another hike expected to follow within the fiscal year. But following the summer's credit crisis and the U.S. Federal Reserve's easing in response to it, Japanese policy makers have opted to stand pat.

The likelihood that the Bank of Japan will raise rates in Japan's fiscal year, which ends in March, fell to about 50% on Friday, the Nikkei reported in its Saturday edition, citing a market gauge based on overnight trading of index swaps.

Meanwhile, both the European Central Bank and the Bank of England are expected to hold interest rates steady at their policy meetings next week.

"With no cuts on the horizon and a slumping dollar, the euro should move to new heights," wrote analysts at BMO Capital Markets.

"The BoE should remain on hold for a fourth month in November, as the economic data have yet to point to a slowdown," they added.

Lisa Twaronite reports for MarketWatch from San Francisco

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