Major currencies stayed rangebound after the dollar trended lower in New York in the wake of falls on Wall Street and Fed Chairman Alan Greenspan's somewhat downbeat pronouncements on the US economy, dealers said. US president George Bush's address on Iraq to the United Nations outlined his resolve on the matter but did not create waves on the currency market, they added. "Markets have thrown out the script, with equities and the dollar sagging rather than continuing the anticipated post-September 11 relief rally," said Steve Pearson, head of currency strategy at HBOS Treasury Services said. "We guess this is an efficient markets type lesson - if everyone expects the price to do something tomorrow it will happen today." The dollar rallied on Tuesday and Wednesday but not Thursday, he added.
Greenspan's dour tone on the US economy weighed on the dollar, Kamal Sharma at Commerbank said. "After Wednesday's downbeat Fed Beige Book, it would have been difficult for the Fed Chairman to be too optimistic on growth in his testimony to the Congressional Budget Committee," he said. There was more bad news yesterday as the US weekly jobless claims rose by a bigger than expected 19,000 indicating that the last US unemployment figures were "a sham."
"The September payroll report could be a horror," Sharma said. There could be more bad news for the dollar today if US retail sales for the month of August disappoint. According to forecasts, US retail sales are seen rising 0.6% in August, after rising 1.2% in July. However, excluding autos, sales are seen moderating to just 0.1%, after rising 0.2% in July.
President Bush's speech to the UN was measured in tone, urging the UN to live up to the vision of its founding fathers. After all Iraq - in breach of 23 UN requirements - is flouting the collective will of nations. "A determined attempt by the US and the UK to proceed under UN auspices makes it more difficult for the market to single out any one currency for punishment," Pearson at HBOS said. "Less uncertainty over the political process and diminished risk of unilateral US action could allow risk premia - in oil, gold, the Swiss franc, stocks, the dollar itself - to subside," he added.
Dollar-yen rose above 120 after moving briefly below the level. "While there is plenty of uncertainty about the US outlook, one thing we are certain of is that Japan is in worse shape! Unfortunately this does not necessarily mean the yen will fall - the current account surplus is a powerful support," Pearson said.
Capital repatriation ahead of the fiscal half year is not identifiable in the securities flows data, but there may be downward pressure through hedging decisions aimed at locking in exchange rates over the accounting period end, he added. Sterling held steady. The debate over UK's entry into the euro was kept alive by Chancellor Gordon Brown's reiteration that the Treasury's five economic tests for UK entry into the European Monetary Union will be assessed by June next year.//www.ananova.com