Forex - Dollar stays weak on expectations for poor data this week

LONDON, Sep. 24, 2007 (Thomson Financial delivered by Newstex) -- Major currencies stayed range-bound, with the dollar floundering ahead of this week's US data that are expected to show continued weakness in housing and consumer confidence, boosting expectations for further cuts in US interest rates.

The dollar fell to a new all-time low against the single European currency of 1.4129 usd this morning before edging back up, and it was also weaker against the pound and yen.

A cut in the Federal Reserve's benchmark interest rate of 50 basis points, to 4.75 pct, sparked the recent run of dollar weakness, exacerbating the pressure on the currency from the subprime mortgage crisis and credit crunch.

Currency analysts expect the dollar to fall further this week.

'The general tone of the US data this week is likely to compound expectations for further cuts in US interest rates - with market attention now settling on the possibility of a further quarter point-cut at the October
Federal Open Markets Committee meeting,' said economists at Bear Stearns. (NYSE:BSC)

They predict the dollar will drop to as low as 1.50 usd to the euro in the coming months.

Data on Tuesday are expected to show US consumer confidence falling to 104.5 in September from 105 in August, and existing home sales dropping to 5.445 mln in August from 5.75 mln the prior month, according to forecasts from Thomson IFR Markets.

Before that, indications on the Fed's thinking will come from speeches by FOMC member Richard Fisher and chairman Ben Bernanke today, and Bernanke again on Thursday.

Elsewhere, euro zone data this week will be scrutinised for signs that the strong euro is harming the area's economy. Foremost among the data will be Germany's IFO index of business confidence on Tuesday and euro zone consumer price inflation figures later on.

'The mounting strength of the euro is building pressure on the ECB to ease the pain with a cut in rates - which should be justified by the weakening economic confidence and growth picture in the euro zone,' said the Bear Stearns economists.

They expect a weaker IFO reading and a sharp rise in the headline HICP inflation figure.

Meanwhile, the yen was steady after the news that Yasuo Fukuda will become prime minister of Japan following his election as president of the Liberal Democrat party yesterday.

'His victory was well anticipated by the market and hence is likely to have little, if not any, impact on the market,' said BNP Paribas (OOTC:BPRBF) analysts.


London 0811 GMT Hong Kong 1.00 pm (0500 GMT)

US dollar
yen 114.94 down from 115.05
sfr 1.1700 down from 1.1705
Euro
usd 1.4119 up from 1.4102
yen 162.25 down from 162.28
sfr 1.6526 up from 1.6506
stg 0.6966 up from 0.6960
Sterling
usd 2.0254 unchanged 2.0254
yen 232.77 down from 233.06
sfr 2.3714 up from 2.3708
Australian dollar
usd 0.8666 up from 0.8662
stg 0.4277 down from 0.4376
yen 99.57 down from 99.67