26 January 2001, 12:44  Forex: Dollar weakens vs euro in early London despite U.S. rate cut hopes

LONDON (AFX) - The dollar weakened against the euro in early London trade despite the consensus market view that the FOMC will cut rates by 50 basis points at next week's meeting, dealers said. Dealers could find no obvious reason for the dollar's loss of ground but said the euro has rallied against both the U.S. currency and sterling after being oversold in recent days. "People are taking a little bit of heart on the prospects for the euroland. The euro has broken through the resistance level of 0.9270 and if it can hold above that level, we should see it continue to firm," Halifax economist Steven Pearson said. He said investors were initially disappointed when Federal Reserve Chairman Alan Greenspan failed to mention interest rates in his testimony to the U.S. senate but they took his warning of zero growth in the U.S. economy as a signal of a 50-point rate cut. Deutsche Bank's Paul Meggyesi agreed, revising his prediction from an earlier 25-point cut. "Respected Fed-watcher John Berry of the Washington Post has also gone to press claiming that Greenspan will press for a 50 basis point cut, albeit without citing any Fed sources," Meggyesi said in a research note. Dealers said investors will watch today's U.S. durable goods orders data for December for further clues on the likely size of the expected rate cut. The yen remained under pressure after the Bank of Japan appeared to change its earlier view that the currency was too weak. The BoJ governor said in comments overnight that "if the yen does go to far to one side, that's not good (for the economy)."

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