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Euro touches five-week low against the greenback
The dollar hit a five-week high against the euro yesterday as US inflation data showed rising price pressures in the economy, which suggested that the pace of the Federal Reserve's monetary easing could slow.
- Reuters
- Published: 00:30 May 2, 2008
New York : The dollar hit a five-week high against the euro yesterday as US inflation data showed rising price pressures in the economy, which suggested that the pace of the Federal Reserve's monetary easing could slow.
Investors ignored higher-than-expected US initial jobless claims, which did not bode well for today's non-farm payrolls report, and instead focused on the positive aspects of the US spending and core inflation data.
The core PCE price index, the Fed's preferred gauge of inflation, was higher than market expectations, while US personal spending rose by twice as much as forecast despite a cooling economy. That data blunted the sting of the US jobless claims and backed a growing view that the US economy was in far better shape than most people had thought.
"We had higher personal spending and core PCE was a touch higher than expected and markets totally disregarded the jobless claims number," said Steven Butler, director of foreign exchange trading at Scotia Capital in Toronto. "In this market, people just want to buy dollars," he added.
Focus
In early New York trading, the euro fell to a five-week low against the dollar to $1.5467, but traded back up to $1.5492, still down 0.8 per cent on the day. Traders also said markets ran stop-losses in euro/dollar below $1.5490, accelerating the euro's decline.
Markets also shifted their focus from the Fed's failure to signal a definitive end to rate cuts, to worries about the health of the euro-zone economy. The Fed cut rates by 25 basis points to 2 per cent on Wednesday, as most expected, and signaled that its next move would depend on developments in financial markets and economy.
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