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Dollar Slips Slightly Against Euro
Monday May 9, 4:06 pm ET
By Malcolm Foster, Associated Press Writer
Dollar Slips Slightly Against Euro After Touching 3-Week High on Optimism About U.S. Economy


NEW YORK (AP) -- The dollar slipped slightly against the euro Monday, but mostly retained gains made after Friday's stronger-than-expected U.S. jobs report. Earlier, it briefly touching a three-week high against the euro on optimism about the U.S. economy.
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The dollar also rose against the Japanese yen on relief that the Chinese government didn't make any moves to revalue its currency, the yuan, during last week's string of Japanese holidays called "Golden Week."

"The dollar seems to be consolidating its gains from Friday. It's holding its own," said Grant Wilson, senior foreign exchange trader at Mellon Financial in Pittsburgh. "We did finally make it through all of Golden Week without a revaluation of the yuan."

The 12-nation euro was trading at $1.2840, down slightly from $1.2827 on Friday, when the U.S. Labor Department reported that employers had added 274,000 jobs in April, enough to hold the jobless rate steady at 5.2 percent. In earlier trading, it fell to $1.2790, a three-week low.

Against the yen, the dollar rose to 105.59 yen from 104.93 Friday.

The Japanese currency had appreciated last week on speculation that China might loosen the yuan's link to the dollar, which U.S. and other officials say keeps the yuan artificially low and gives Chinese exporters an unfair price advantage, particularly against major trading partners like Japan. When China made no moves on its currency, the yen fell back.

Wilson predicted China would make a first small step toward revaluing its currency -- like widening the band in which the yuan is allowed to trade against the dollar -- in the second half of the year.

"The first step is going to be a minor one and see how market reacts, like sticking your toe in the water," he said.

The dollar also gained against the British pound after the government announced weak industrial production numbers and the Bank of England said it would leave interest rates unchanged. The pound fell to $1.8836 from $1.8907 Friday.

Traders said they were looking ahead to two U.S. economic reports coming out this week: Wednesday's trade balance figures for March and Thursday's April retail sales figures.

While the euro has gained against the dollar over the last year amid concerns about the enormous U.S. trade and budget deficits, some traders say they will be more focused on the retail sales report as they look for hints on the direction of the U.S. economy and the Federal Reserve's interest rate policy.

"We've become somewhat anesthetized" to the growing trade deficit, said Michael Woolfolk, senior currency strategist at Bank of New York. "Most people are focusing the rise in U.S. interest rates and U.S. consumption. I would call the April retail sales figures a 'make-or-break' report for the dollar."

The Fed raised short-term interest rates last week by one-quarter percentage point to 3 percent. It was the eighth increase of that size since the Fed began to tighten credit last June. The Fed is expected to keep pushing rates higher through much of this year.





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