The dollar tumbled to a fresh eight month low against the euro on Tuesday as nagging worries about the strength of the U.S. economy and the gaping trade deficit kept investors on the back foot. Analysts said the dollar would likely stay under pressure from a range of factors, including uncertainty about the result of November's presidential election and comments from European officials that suggest they are comfortable with a higher euro. "I don't think we've seen the end of this bout of dollar weakness," said Tohru Sasaki, chief forex strategist at JPMorgan Chase in Tokyo, adding the currency was unlikely to gain support from economic data due this week. The euro, which has gained close to five percent in the past three weeks, rose as high as $1.2839 . As of 0248 GMT it was at around 1.2835, less than one cent below a record high of 1.2930 struck in February. The dollar bought around 106.67 yen , barely changed on the day and not far off the six-month low of 106.22 it scraped on Monday.
The Swiss franc was at around 1.1930 per dollar, after hitting a new eight year high of 1.2927. The U.S. dollar index <=USD>, which shows the dollar's movement against a basket of major currencies including the euro and the yen, hit an eight-month low on Tuesday. The index has dipped around 3.7 percent since the release of data on Oct. 14 that showed the U.S. trade deficit in August was the second-largest on record. An address by European Central Bank President Jean-Claude Trichet on Monday also helped to underpin the euro. In his annual report to the European Union parliament, Trichet did not speak directly on currencies. That contrasted with his comments in January, when he called the euro's surge "brutal", sending it tumbling.
U.S. RATE RISES TO END?
A surge in oil prices to record highs of above $55 dollars a barrel this week has heightened worries about the strength of the U.S. economy, and led some to question whether a series of interest rate rises by the Federal Reserve is coming to an end. "I think it's now a 50/50 question of whether the Fed is still going to raise rates in November," said Hideaki Furumaya, forex manager at Trust & Custody Services Bank in Tokyo. "If they decide to hold off it would show that the Fed has turned bearish on the U.S. economy, and obviously that would not be a good scenario for the dollar." The Fed has raised rates three times this year to 1.75 percent, and until very recently, was widely expected to continue that cycle when its policy-setting Federal Open Market Committee (FOMC) next meets on November 10, around a week after the U.S. presidential election. A further clue on the state of the economy will come later on Tuesday when the U.S. Conference Board releases October consumer confidence data. Economists in a survey expect a median reading of 94.0 compared with 96.8 in September. Some say a victory for Democratic Senator John Kerry over President George W. Bush in the election would be a signal to sell the dollar, since a Kerry administration would likely be less tolerant about any Japanese intervention to stem the yen's rise. Still, in Japan, which is benefitting from strong exports to China, officials have shown less concern about a stronger yen than last year. In 2003, they spent a record 20 trillion yen to help prop up the dollar and defend the country's export-led economic recovery. Japan will take action if the dollar falls too quickly against the yen, Vice Finance Minister for International Affairs Hiroshi Watanabe said in New York on Monday. But many believe such action is unlikely in the near-term. "I don't think we'll see any intervention until the dollar/yen breaks below 103," said JP Morgan's Sasaki.////