SINGAPORE , April 29 - The U.S. dollar was holding its stockmarket-led gains while the euro pondered its direction after poor data thwarted its push toward fresh four-year highs in Asia, where trading was thinned by a Japanese holiday on Tuesday. Markets had a lot of information to trade on -- the strong gains in U.S. equities, a conditional offer from North Korea to end its nuclear programme, an improving SARS situation in parts of Asia, poor German economic data, and a busy U.S. data week. But dealers said there were reasons for caution on each factor: uncertainty about the U.S. economic outlook, North Korea's habit of rapidly shifting its stance, SARS remaining a major concern, and Europe -- while not growing strongly -- not needing to fund a U.S. style trade deficit, leaving markets hamstrung by indecision.
Volume in Asia has also been thinned by Japan's "Golden Week" holidays, with Japanese markets closed on Tuesday. The euro was hovering under $1.1000, having been slapped down from a near four-year high of $1.1078 on Monday by a weaker than expected Ifo index and a cut in the government growth forecast. "I think the market went long the euro yesterday and got a bit of a surprise," said Karl Broecker, head of treasury at Landesbank Baden-Wuerttemberg in Singapore. "Looking at the economic fundamentals, it clearly is a question at these levels for investors and speculators whether to buy more euro or have a wait-and-see attitude." The Ifo index fell to 86.6 in April from 88.1 in March, well below the most pessimistic forecasts, and soon after Germany, Europe's largest economy, cut its 2003 GDP forecast to 0.75 percent from the previous prediction of 1 percent in January. But Europe does not need to fund a large current account deficit, as the United States does, and sentiment remains broadly negative on the U.S. dollar despite its gains.
"Traders are still bearish on the dollar, but it recovered a bit because of the stock market last night," said a trader at a Singapore bank. On Wall Street, the Dow Jones industrial average rose 1.99 percent <.DJI>, the S&P 500 index rose 1.78 percent <.SPX>, and the Nasdaq Composite index rose 1.93 percent <.IXIC> on optimism about a rebound in U.S. corporate earnings and th economy People expecting upcoming U.S. data to be weak were still looking to buy the euro on dips and sell the dollar on rallies, the trader said. Dollar bulls are expecting U.S. consumer confidence data later on Tuesday to show a solid rise for April, giving the dollar a further boost.//