Dollar mixed before US housing data

LONDON, June 26, 2007 (AFP) - The dollar was mixed against major rivals in early European trading on Tuesday while the foreign exchange market awaited key housing data in the United States.
The euro fell to 1.3450 dollars, from 1.3460 dollars late on Monday in New York.

The dollar dropped to 123.22 yen, from 123.64 yen late Monday.

"The yen has strengthened marginally further with the financial markets unable to shake the uncertainties related to the potential fall-out from the US sub-prime mortgage problem which has returned to the forefront of market participants' minds," said Derek Halpenny, senior currency economist at the Bank of Tokyo-Mitsubishi in London.

Traders were awaiting the release later Tuesday of US data on new homes sales for May. Analysts' expectations are for a drop in sales to 920,000 units, compared with 981,000 in April.

The National Association of Realtors said Monday sales of existing US homes fell in May to their lowest level in four years, dropping 0.3 percent to a weaker-than-expected annualised pace of 5.99 million.

The market was also cautious ahead of a two-day US Federal Reserve policy meeting through Thursday although most analysts expect the central bank to keep rates at 5.25 percent as it monitors inflation.

"Throughout the downturn in the US housing market, the Fed has adopted a relatively sanguine view of the likely repercussions for the economy as a whole," Calyon economist Daragh Maher noted on Tuesday.

"For some time, the market doubted whether this optimism would prove justified. Yet while the economy has slowed substantially, the lack of any fallout on the employment front was seen as vindicating the Fed's stance, and the market no longer looks for an easing in interest rates."

In the absence of a rate change by the Fed on Thursday, market participants was set to look closely at the central bank's statement for fresh clues on the outlook of borrowing costs.

"Unless we can confirm the outlook for US interest rates, it will be difficult to assess how big of a risk the housing sector is," said Saburo Matsumoto, chief foreign exchange strategist at Sumitomo Trust Bank.

While US rates are expected to remain on hold, the Bank of England was set to hike British borrowing costs by a quarter-point to 5.75 percent in July to help cool consumer spending, analysts have said.

Forecasts of higher British rates had sent the pound above 2.0 dollars on Monday.

The euro was changing hands at 1.3450 dollars, against 1.3460 dollars late on Monday, 165.72 yen (166.46), 0.6731 pounds (0.6736) and 1.6547 Swiss francs (1.6539).

The dollar stood at 123.22 yen (123.64) and 1.2303 Swiss francs (1.2284).

The pound was being traded at 1.9984 dollars (1.9977).

On the London Bullion Market, the price of gold dipped to 649.20 dollars per ounce, from 650.75 dollars late on Monday.

bur-bcp/rfj/wai

AFP

Whatever is the short term trend of the dollar , long term trend is very clear for the dollar that is clearly down . Its the result of years of overspending by the americans.

a weak dollar means goodnews for american exporters who have been squezeed out by the chinese


this development means good news for companies like raythean & lockheed-martin



.

Weak $ is because US economy is getting a hit and not because of chinese curruncy's weakness, major financial houses are predicting further down trend in next quarters. BTW from Indian economic point of view you can be right!