8 July 2005, 13:09  Dollar regains strength as today's US jobs data returns to centre stage

The dollar regained strength against major currencies after wobbling yesterday following bomb attacks in London, as investors refocused their attention back on this afternoon's key US jobs data. As London was hit by four bomb attacks on public transport yesterday, financial markets saw a flight to quality, with the Swiss franc and the euro gaining at the expense of the dollar as well as the pound. "Yesterdays terrorist attack in London triggered a short term flight into quality, but financial markets are likely to return to normality today," BNP Paribas analysts said. Today, focus is likely to return to this afternoon's US non-farm payrolls report for June, which is expected to show that US employment numbers remain strong and to provide the dollar with further support later in the day. Most analysts are expecting employment to grow by around 200,000, which would confirm that US interest rates are set to continue rising. Meanwhile, the pound continued to drop sharply against the dollar, falling below the 1.74 usd mark for the first time since Dec 2003. The pound fell sharply yesterday in the wake of the terrorist attacks, which only served to strengthen expectations that the Bank of England will cut interest rates next month. The Monetary Policy Committee met yesterday and, as expected, left the UK's main repo rate on hold at 4.75 pct. The pound failed to gain any lift from this, however, with a cut in August seen as virtually inevitable after the spate of recent dismal data on the UK economy. Elsewhere, the yen was also weak as oil prices rose back up this morning on fears of disruptions to supply from hurricanes in the US. "As Hurricane Dennis heads towards the Gulf of Mexico, oil prices are likely to be pushed higher today, weighing on Japanese sentiment and thus the yen," BNP Paribas analysts said. The Japanese currency is typically highly sensitive to movements in oil prices as Japan is a 100 pct net importer of oil.

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