LONDON (AFX) - The dollar continued to drift lower in early trade as the G8 meeting in Genoa opened amid market speculation that there may be a softening in the strong dollar policy. Comments from US president George W Bush that the greenback's value should be determined by the market also dented the dollar. The remarks come as the market reassesses the economic outlook for the US which appears to be recovering slower than previously anticipated. The main reason for the dollar's weakness is speculation that the strong dollar policy may be adjusted. The market will be fine tuned for comments emanating from the G8 meeting Steven Pearson, economist at Halifax, said.
"There is no actual expectation that a statement will come but the risk attached to it have risen amid pressure from the US manfacturing sector," he added.
"The question is how tenable is the strong dollar," he said. The G8 will be very careful if it at all chooses to comment on the dollar, he noted.
Against this backdrop the level of optimism over the US economy is very low. US Fed chairman Alan Greenspan's decidedly downbeat pronouncements of the US economy jolted the market which responded by selling dollars, Pearson said.
"Greenspan's comments were a dose of realism," he added. The dollar was lower all around but sterling notched the biggest gains against the greenback, having lagged the euro and the yen's recent progress.
"There was a spike on sterling/dollar from late yesterday and there is steady increment today," Pearson said, adding that sterling's rise was not surprising given the UK currency's recent poor run. Dolar/yen rose slightly as the public holiday in Japan meant very thin trade, dealers said.