Reuters: US Dollar Report: FOREX-Dollar, yen slide as US data fuels safe haven exit

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FOREX-Dollar, yen slide as US data fuels safe haven exit Oct 1st 2012, 15:34 Mon Oct 1, 2012 11:34am EDT * Likely Moody's downgrade could push Madrid to seek bailout * Euro zone PMI not as bad as earlier estimates * U.S. manufacturing sector rises in September By Gertrude Chavez-Dreyfuss NEW YORK, Oct 1 (Reuters) - The dollar fell from a three-week high and the yen weakened broadly on Monday as a rise in U.S. manufacturing activity prompted a sell-off in safe-haven currencies. The U.S. manufacturing sector last month grew for the first time since May, getting a boost from new orders. Also giving risk appetite a boost was an increase in Germany's purchasing managers' index (PMI), which grew last month to its highest reading since March, although it was still below the expansionary 50-mark. Joseph Trevisani, chief market strategist, at Worldwide Markets in Woodlciff Lake, New Jersey said the U.S. manufacturing report eases overall concerns about the economy, "but it won't last because the world...and the U.S. are still facing a drastic slowdown". China's factory activity, meanwhile, was also less grim than expected, edging higher, but it still pointed to a continued contraction in activity. The dollar index, a gauge of the greenback's performance against six major currencies, was last down 0.3 percent at 79.706 after rising as high as 80.147, its strongest level since Sept. 11. Speculators boosted bets against the safe-haven dollar in the latest week to the highest in more than a year, according to data from the Commodity Futures Trading Commission released on Friday. The euro, on the other hand, rallied from three-week lows against the dollar, boosted mainly by the German data and decent manufacturing numbers from debt-plagued Spain and Italy. But traders said gains could be limited by concerns about a possible credit rating downgrade for Spain. The euro rose 0.4 percent to $1.2907, although some analysts said its resilience was due less to confidence in the euro zone than to dollar weakness after the U.S. Federal Reserve unleashed another round of monetary easing last month. The common currency hit a three-week low of $1.2802 in Asian trade, breaking below support at its 200-day moving average at $1.2823. A daily close below $1.2823 could signal further weakness ahead. Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, said she expects the euro to trade in a range of between $1.28 to $1.32 against the U.S. dollar until there is a catalyst sufficiently large to push it out. She added that Scotia's year-end target was $1.26 for the currency pair. Investors are awaiting the outcome of credit agency Moody's review of Spain's sovereign rating. Europe's fourth largest economy may be downgraded to junk status, piling pressure on it to seek an international bailout soon. "A downgrade could force Spain's hand in seeking a bailout and should see a relief rally in the euro," said Adam Myers, senior foreign exchange strategist at Credit Agricole. "But until that happens, weak economic data will add to the downward pressure on the euro." YEN WEAKNESS The yen, another safe-haven, also suffered a setback in the wake of the upbeat U.S. manufacturing report. The dollar edged up 0.2 percent against the yen to 78.06 yen, off a more than two-week low of 77.43 yen hit on Friday. The euro rose 0.5 percent against the Japanese currency to 100.76 yen. The Bank of Japan's quarterly tankan survey of business sentiment released on Monday showed big Japanese manufacturers expect the dollar to average around 79.06 yen in the fiscal year through March 2013. The survey also showed the mood among major manufacturers worsened in the latest quarter and was likely to stay gloomy, dragged down by weak Chinese and European demand. Link this Share this Digg this Email Reprints

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