LONDON - The dollar steadied after early pressure in Europe on Friday after news of a record U.S. current account deficit, poor unemployment data and a fall on Wall Street in the previous session knocked it back. The market was also digesting Congressional testimony on Thursday from U.S. Federal Reserve chief Alan Greenspan, who warned against ballooning government deficits which could push interest rates higher and imperil long-term growth prospects. Analysts said they anticipated a slight move lower on Friday given Greenspan's comments and the data, though they saw the downside limited. "It looks like the dollar's on the backfoot, though it's had some pretty good gains over the last 10 days or so," said Aziz McMahon, foreign exchange strategist at ABN AMRO.
There's probably going to be a bit more profit-taking today, and there are some fundamental reasons to back that up as well -- soft U.S. numbers yesterday and the Greenspan testimony really didn't offer any comfort that people had been hoping for." By 3:42 a.m. EDT, the dollar managed to pull back from early session lows of $0.9828 per euro, versus New York's close of $0.9811, but was still slightly negative. It was also a touch lower versus the Japanese currency at 119.90 yen, but off the day's low of 119.45. Traders said the dollar looked vulnerable early on but commercial flows had given it a boost. "We've had interest from the Far East, Middle East and former Soviet Union all on the sell-side of euro/dollar," said one European trader. The dollar's falls were tethered also because the yen suffered from lingering pessimism over the Japanese economy with Japanese share prices recently dropping to 19-year lows, and a generally weak economic outlook in Europe. Dealers in Tokyo said operators had been closing long positions ahead of a three-day weekend in Japan. Tokyo financial markets will be closed on Monday for a national holiday.//www.money.iwon.com