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May 16, 2006

US dollar weaker after Monday’s gains

Permalink: US dollar weaker after Monday’s gains by Elaine Frei

The US dollar was down again on Tuesday after a day of gains on Monday. The declines came on reports that housing starts in the United States were down more than had been predicted. Producer price data was also under expectations. Both items convinced analysts that there is a good chance that the Federal Reserve will not raise interest rates at its next meeting.

By the middle of the trading day in New York, the greenback had lost 0.5 percent in relation to the euro to $1.2853. The US currency was also down 0.4 percent to ¥110.05 against the Japanese yen and it declined by 0.3 percent to $1.8855 versus sterling.

The euro was otherwise quiet, holding about steady at ¥141.42 against the yen and at £0.6811in relation to sterling. The shared currency did add 0.1 percent to SFr1.5523 versus the Swiss franc. The euro held its own despite a drop in the ZEW index of economic expectations in Germany. The index was at 50 in May, down from 62.7 in April. The declines were blamed on higher oil prices and a stronger euro. Also a factor were comments from a European Central Bank official who said that the G7 did not endorse a change in the exchange rate between the euro and the US dollar at its meeting last month.

Emerging currencies did better on Tuesday than they did Monday. The Turkish lira added 3.3 percent to TL1.4355 in relation to the US dollar, gaining back more than half its 6.1 percent slide on Monday. The South African rand got back a third of its 3 percent drop on Monday, rising 1.1 percent to R6.3550 versus the US currency.



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