The dollar hit an eight-month low against the euro on Tuesday, coming within a cent of a record low, and set its lowest level in eight years versus Swiss franc on concerns about the U.S. economy and current account gap. But the dollar's tumble, which shaved four cents off it against the euro over the past week, came to a temporary halt as investors paused for breath ahead of a possible test of the record low of $1.2927 per euro. "We have seen a sharp move of the dollar on accumulation of concerns, with the current account being one. What's happening now is people are getting nervous in pushing it further, but I wouldn't be surprised to see a move towards late $1.2900s soon," said Neil Mellor, currency strategist at Bank of New York. The euro had risen to $1.2841 before pushing back to $1.2786 by 0945 GMT. The U.S. dollar index <=USD>, which shows the currency's movement against a basket of major currencies including the euro and the yen, hit an eight-month low earlier. The index has dipped almost four percent since the release of data on Oct. 14 that showed the U.S. trade deficit in August was the second-largest on record.
The dollar has been under pressure as high oil prices clouded the outlook for the world's biggest economy and raised concerns if the United States could attract enough capital to fund its growing current account deficit. Federal Reserve officials expressing the need for a weaker dollar to correct the structural imbalance also weighed on the greenback. The yen stood at 106.83 per dollar after hitting a six-month high of 106.18 on Monday. Analysts say comments by a senior Japanese Finance Ministry official made people cautious in pushing the yen higher. Japan's Vice Finance Minister for International Affairs Hiroshi Watanabe said late on Monday Japan will take action if the dollar falls too fast against the yen. Oil traded held above $54 a barrel on Tuesday as heating oil supply concerns lingered ahead of the northern winter.
SANGUINE SO FAR
The euro was also getting support from a lack of opposition from European policymakers about its strength. This attitude contrasts with the barrage of comments in February when they strongly criticised the strength of the single currency. On Monday, ECB President Jean-Claude Trichet made no mention of the euro's rally during his annual report to the European Parliament. "There is a clear dollar-selling trend and you've just got to follow it. You really don't need reasons," said a trader at a Japanese bank. "At this pace, I think the market will test $1.2930 quite soon." Investors were also increasingly cautious ahead of the Nov. 2 presidential elections in the United States. Polls continue to show a tight race between President George W. Bush and his Democratic rival John Kerry. On the economic front, analysts were looking forward to the 1400 GMT release of consumer confidence data from the U.S. Conference Board. Economists in a survey expect a median reading of 94.0, compared with 96.8 in September. "We think it's not going to be a good figure coming out of the U.S. We don't expect any dollar support to come from it," said Frida Gjorstrup, currency strategist at J.P. Morgan Chase.////