17 August 2001, 12:39  Forex - Euro down vs dollar in early London trade ahead euro zone CPI for July

LONDON (AFX) - The euro was down against the dollar in early London trade ahead of the euro zone July consumer price index, due at 11.00 am today, dealers said.
Whether or not the common currency can get more optimism on the euro zone's Harmonised CPI for July is very debatable, they added. Jane Foley, currency strategist at Barclays Capital, said: "The market is expected today's Harmonised CPI to come in a lot weaker than forecast of 2.8 pct. That should further pave the way for an European Central Bank rate cut, possibly on Aug 30, if not certainly in September."
"Since the publication of the ECB monthly bulletin last week, the euro has rallied quite significantly and therefore I am dubious as to whether or not the euro can find some more upside on the anticipation that we are going to see a rate cut soon," she added. Dealers said the weakness of the US dollar against the yen and the euro and how much further will it persist has remained the main theme in the market place .
Foley pointed out that there seemed to have been some US dollar purchases in US trading hours, suggesting that perhaps US investors are a little more confident about a stabilisation in the economy. Meanwhile sterling was soft against both the dollar and the euro in early trade amid a lack of leads.
The yen continued to firm amid rumours that the Japanese Ministry of Finance had cut short his holiday on concerns about the weakness of the US dollar/yen pair, dealers said.
Foley cited talk that the ministry of finance would be more prepared to enact intervention in support of the US dollar if it were to maintain levels below 120, were rife.
However, analysts noted that in its attempts to talk the yen lower through the minutes of its last meeting, the Bank of Japan last managed to help send the currency back above the psychologically-important 120 level.
"The market is pretty nervous about intervention but there is a lot of possibility that we are going to see repatriation back into the yen in the next few weeks as the next month is the end of the half fiscal year next month," she said.

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