Tue, Feb 26 2008, 06:09 GMT
http://www.afxnews.com
HONG KONG (Thomson Financial) - The US dollar hardly moved against the euro and the yen in afternoon Asian trade on Tuesday as investors opted to move to the sidelines ahead of key economic data due for release later this week.
On Friday the US Commerce Department will announce last month's consumer spending, which accounts for more than two-thirds of gross domestic product. Before that, new homes sales for January will be out on Wednesday.
"The currencies are stuck in a pretty narrow range. The currency market is focused on the US economic data," said David Mann, currency strategist at Standard Chartered Bank. "We should see some further increase in dollar selling" should the data confirm market fears that the world's largest economy is on the brink of a recession.
At 1.00 pm (0500 GMT), the euro was quoted at 1.4829 dollars from 1.4832 in Tokyo this morning. The dollar was at 107.92 yen from 108.04.
The dollar, though, may strengthen gradually against major currencies in coming weeks because "we are nearing the end of the dollar weakness," said Mann.
Optimism that the US economy will start showing signs of recovery after the series of interest rate cuts by the Federal Reserve and the economic stimulus package being implemented by the Bush administration may help curb the dollar's fall.
The dollar may rise to 110 yen by the end of the second quarter from 104 at end-March, said Mann. The euro may weaken slightly to 1.45 dollars from 1.51 during the same period, he said.
The Fed has lowered rates by a cumulative 2.25 percentage points since September to ease the credit crunch and lift the economy. The Fed's policymakers will meet next on March 18 to decide on interest rates.
Investors are also waiting for Fed chairman Ben Bernanke's speech before the House Financial Services Committee on Wednesday for further clues on US monetary policy amid an accelerating inflation rate and record-high crude oil prices.
Receding expectations for aggressive rate cuts in the US are also likely to support the dollar.
"The market is still pricing in a 50-basis-point rate cut for the March 18 meeting, but expectations of more aggressive cuts going forward have been scaled back," said John Noonan, analyst at Thomson IFR.
The euro was also rangebound against the US currency as investors were torn between speculations that the European Central Bank will raise rates to fight inflation or lower them to aid its financial sector reeling from losses due to unpaid housing mortgages in the US.
"There is lingering concern that European financial institutions have large exposure to credit derivative investment products, which is potentially a negative factor for the euro," said Minoru Shioiri, forex manager at Mitsubishi UFJ Securities.
"But at the same time, people find it difficult to start selling the euro on this lead as long as the European Central Bank maintains its vigilance against inflation," he said.
Hong Kong 1.00 pm (0500 GMT)
US dollar
yen 107.92
sfr 1.0897
Euro
usd 1.4829
stg 0.7536
yen 159.92
sfr 1.6154
Sterling
usd 1.9662
yen 212.13
sfr 2.1425
Australian dollar
usd 0.9278
stg 0.4718
yen 100.13
New Zealand dollar
usd 0.8096
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