Thursday August 21, 10:11 PM
Dollar slumps as US leading indicators report fuels worry
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NEW YORK (AFP) - The dollar fell sharply Thursday as a weak report on leading economic indicators renewed concerns over the US outlook, contrasted with slightly better-than-expected eurozone data.
The euro was trading at 1.4898 dollars at 2100 GMT, up sharply from 1.4745 dollars in New York late on Wednesday.
The greenback sank to 108.46 yen from 109.88.
"The dollar has been undermined by renewed concerns over the health of the US financial system," said analyst Lee Hardman at The Bank (TBHS - news) of Tokyo-Mitsubishi UFJ in London.
The Conference Board's forward-looking index of key US economic indicators was down 0.7 percent in July, worse than expected, reflecting ongoing worries about real estate and a credit squeeze.
"The recent decline in gas (gasoline) prices isn't enough to overcome all the negative momentum that's been building up through the spring and summer," said Ken Goldstein, a labor economist at the Conference Board.
"A few months ago, there was some discussion about a second-half (2008 economic) recovery. If there's a second-half recovery, it'll be the second half of 2009," Goldstein added.
Dealers said the dollar might come under more pressure if upcoming US economic indicators, including next week's monthly employment report, disappoint markets.
"We might see some further scaling back of already diminished expectations for the Federal Reserve to raise (US) interest rates over the next six months," wrote NAB Capital strategist John Kyriakopoulos in a note to clients.
Dealers said news that the eurozone's purchasing manager's index of activity rose slightly to 48.0 in August from 47.8 points in July offered some support for the euro even though the reading remained below the level of 50 that would signify expansion.
Sue Voigtsberger at PNC Bank said it remained unclear whether the dollar is taking a breather from its rally or is in a more prolonged correction period.
"The question is whether this is a retracement of the retracement, or a reversal of the dollar's weakness," she said.
"My feeling is that the dollar will definitely give back some of its gains, but will not be subject to the aggressive selling of the last year. In short, traders simply get tired of trading on the same news despite its significance."
In late New York trade, the dollar stood at 1.0862 Swiss francs after 1.0990 Wednesday.
The pound was at 1.8781 dollars from 1.8613.
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