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FOREX-US dollar strengthens; euro pressured after EU comment

Published 10/01/2009, 11:16 AM
Updated 10/01/2009, 11:18 AM

* EU's Almunia comments weigh on euro

* U.S. jobless claims increase, personal spending rises

* Lower-than-expected U.S. manufacturing index boosts dlr (Updates prices, adds U.S. data, comments)

By Gertrude Chavez-Dreyfuss

NEW YORK, Oct 1 (Reuters) - The U.S. dollar firmed on Thursday as weaker jobless and manufacturing data burnished the greenback's safe-haven appeal, and comments by a top European official about the euro's recent gains hurt the single currency.

Worse-than-expected U.S. initial jobless claims and a manufacturing index for September that came in lower than forecast reminded investors the economy remained fragile.

"The last week or so, data not only in the U.S. but also globally have been mixed, and that has enabled the dollar to regain its footing," said Win Thin, senior currency strategist, at Brown Brothers Harriman in New York.

"People are reassessing prospects for the economy, and it's getting pretty dicey. I guess we have to see more signs that this U.S. recovery is firming. For now, people are not sure."

Traders also focused on remarks made by Joaquin Almunia, the European Union's economic and monetary affairs commissioner, who said euro strength would be discussed when Group of Seven officials meet in Istanbul at the weekend.

"Comments from an EU official about the euro's strength which would be discussed at the G7 meeting have had a nasty impact on the euro against the dollar," said David Watt, senior currency strategist, at RBC Capital Markets in Toronto. "So people are not selling the dollar at the moment."

Supporting Almunia's statements were comments from European Central Bank President Jean-Claude Trichet, who said excess foreign exchange moves have had an adverse impact. On Monday, he backed the argument for a strong U.S. currency.

The comments followed statements from finance officials around the world in the past week, expressing discomfort with their currencies' strength against the dollar. The greenback tumbled more than 6 percent against a currency basket in the third quarter.

In mid-morning New York trading, the euro fell 0.6 percent to $1.4544.

The government reported a weaker-than-expected Institute for Supply Management manufacturing sector and jobless claims, but strong personal spending for September and pending sales of existing homes more or less preserved the dollar's bid tone.

"The (ISM) was pretty close to expectations, but if you're looking at recovery, the number really didn't do the trick," said Ronald Simpson, director of currency research at Action Economics in Tampa, Florida.

"The orders were up and the headline number was up, and the employment component was lower again, so I think that's taken some air out of the recovery scenario."

The dollar slipped against the yen to 89.59, staying above an eight-month trough of 88.23 yen hit earlier this week on trading platform EBS. Offers from some Japanese exporters limited gains in the dollar, traders said.

The ICE futures dollar index rose 0.5 percent to 77.014.

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