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[ThatHawaiiGuy]

Dollar Hammered on Doubts About Recovery
Tuesday September 9, 4:41 pm ET
By Gertrude Chavez


NEW YORK (Reuters) - The dollar was clobbered on Tuesday, troubled by falls on Wall Street and worries over the sustainability of the U.S. economic rebound, following weak U.S. employment numbers on Friday.

"There's very little going the dollar's way," said Steven Englander, chief FX Strategist Americas at Barclays Capital in New York. "It's still basically a dollar-negative environment following Friday's weak employment numbers," he said.

Late afternoon in New York, the euro climbed to $1.1231 (EUR=), up 1.5 percent from Monday's New York close against the dollar, breaching a key technical level around $1.1212. This triggered some investors to cut their losses and sell dollars for euros, traders said.

The euro also posted gains against the yen and sterling, benefiting indirectly from the greenback's weakness across the board. The single currency rose around 1.5 percent against the yen to 131.22 (EURJPY=) and was roughly 1 percent firmer against sterling at 70.58 pence (EURGBP=).

Against the Swiss franc, the dollar fell to 1.3774 francs (CHF=), while sterling traded about 0.49 percent higher against the greenback at $1.5904 (GBP=).

Englander said the U.S. stock market's weakness also contributed to falls in the dollar as equity investors reeled from a warning from Finnish mobile phone giant Nokia (NOKIV.HE) that revenue might fall at its main unit.

Nokia's revenue alert compounded fears that revenue growth at U.S. companies will slow down in the third quarter.

MARKETS BEGINNING TO DOUBT RECOVERY

Analysts also said currency markets were still spooked by Friday's disappointing employment report, spurring doubts the economic recovery in the United States is not in full swing.

"Financial markets have fully discounted all of the potential good news in the U.S. economy," said John Johnston, global markets research head at RBC Capital in Toronto. "Now, the doubting has begun. The bad news is creeping back in with the weak labor market data," he said.

Johnston expects a period of additional downside for the dollar, weighed down by increasing evidence that other economies like Japan and some countries in Asia are starting to emerge from their economic slump.

Analysts believe that for the dollar to regain its footing, the U.S. economy needs to show a more sustainable growth path.

"The current recovery continues to unfold very much like that in the early 1990s, when there were several false starts as the economy struggled for traction," said Johnston.

The dollar is also being buffeted ahead of the second anniversary of the Sept. 11 attacks on the United States and President Bush's request that Congress supply an additional $87 billion to fund operations in Iraq and Afghanistan.

"The question remains, 'Can you sustain a recovery without job growth?' -- which has an impact on consumer spending and tax revenues. I think the deficit is riding high on people's minds and Iraq is turning into a much more costly situation and the elections are coming up," said Tod Van Name, vice president of foreign exchange at Fortis Bank.

[Talk about an article that pussy foots around the issues...]

YEN MARGINALLY HIGHER VS DOLLAR

The yen, meanwhile, showed traded flat against the dollar, with the greenback nearly unchanged on the day at 116.81 yen (JPY=).

Traders' suspicions that Japan was buying dollars for yen were cited as one reason the greenback was virtually flat against the Japanese currency. The surge higher in the dollar came during the U.S. Treasury Department's (News - Websites) strong four-week bill auction, sparking talk that the Bank of Japan was a bidder.

Traders cited talk in the market that Japanese names were in buying dollars around the 116.10 yen area, but there was no confirmation Japanese authorities were behind the buying.

Intervention by Japanese authorities was cited by traders last week and on Monday for the dollar's firm position against the yen while the greenback was being sold off elsewhere.

[Free market? What free market? Was there supposed to be a free market?]

(Additional reporting by Daniel Bases)


http://biz.yahoo.com/rb/030909/markets_forex_5.html