14 August 2003, 09:58  Dollar Weaker Despite Strong Retail Sales

NEW YORK - The dollar ended the New York session on a weak note Wednesday, pressured by heavy selling in U.S. bond and equity markets. This came despite the release of strong retail sales figures, suggesting that investor confidence in the U.S. economic recovery is fragile. But the currency market remains lackluster, and so the broad ranges which have held firm in recent weeks were never under threat, said analysts. "The dollar wants to do well," said Kenneth Agostino, a trader at Gain Capital in Warren, N.J.. But that will only happen once much clearer signs of the economic rebound emerge, he said. In late New York trading, the euro was quoted at $1.1313, unchanged from late Tuesday. The dollar was quoted at 119.20 yen, up from 118.45 yen late Tuesday. The dollar was quoted at 1.3677 Swiss francs, up from 1.3658, and 1.3790 Canadian dollars, down from 1.3816. The British pound rose to $1.6069 from $1.6036.
Treasurys ended Wednesday near their session lows, with the yield on the 10-year note at 4.57 percent. The Dow Jones Industrials Average lost 38 points, or 0.41 percent, to end at 9271. All this selling across a range of U.S. asset classes came despite the release of another encouraging U.S. economic indicator. Retail sales for July surged 1.4 percent, beating economists' forecasts of a 1 percent increase. June and May data were also revised upward. "These are pretty solid consumer numbers," said Robert Sinche, head of global currency strategy for Citibank in New York. "The burden of proof is now on those who think us growth is not accelerating rapidly." But not everyone agreed that the encouraging numbers necessarily equate with a stronger dollar. "They're good, but I'm not that impressed - it won't last," said Chris Melendez, president and chief executive officer of Tempest Asset Management in Irvine, Calif., pegging a bottom for the euro at $1.1180.
Others argued that encouraging economic data still can't make deeper underlying problems go away. "Better U.S. data might be (considered) bullish for the dollar, but we may have reached the threshold where stronger U.S. growth is negative for the U.S. trade deficit," said Michael Rosenberg, global head of foreign exchange at Deutsche Bank in New York. The U.S. current account deficit, a broad measure of the country's cross-border flow of goods and services, is running at around 5% of GDP. This means the U.S. needs around $1.5 billion every day just to plug that gap and prevent the dollar from weakening. Figures to be released Thursday are expected to show a that the U.S. trade gap in June stood at $41.80 billion, only $37 million narrower than May, itself the third largest deficit ever.
Against the yen, the dollar ended stronger when compared to late Tuesday's closing level, but all these gains were accrued in the Asian session Wednesday. Dealers reported a large Asian central bank buying up dollars at around 116.60 yen, which helped lift the greenback all the way up to 119.50 yen. The same bank then booked profits, and sold the dollar back down to around 119.10 yen.//www.miami.com/

© 1999-2024 Forex EuroClub
All rights reserved