22.08.2008 11:02

FOREX. Thursday summary

The dollar fell the most against the euro in more than a month on speculation further writedowns at financial firms and an increase in crude oil prices will prolong the U.S. economic slowdown.

The yen rose against all of the other major currencies after the Financial Times reported Lehman Brothers Holdings Inc. failed to sell a 50 percent stake, prompting investors to reduce holdings of higher-yielding assets funded in Japan. The dollar is headed for a 4.8 percent increase versus the euro in August, the biggest monthly gain since May 2001.
The dollar has gained almost 8 percent versus the euro since touching the all-time low of $1.6038 on July 15 and appreciated 0.4 percent against the yen this month as reports showed the European and Japanese economies shrank in the second quarter and crude oil fell almost 20 percent from a record of $147.27 a barrel reached July 11.
Crude oil increased 5.7 percent to $121.55 a barrel today on speculation tension between the U.S. and Russia will disrupt supplies. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to calculations based on their value changes. A reading of 1 would mean they move in lockstep.
``Commodities are taking off,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ``Rising commodities reinforced the momentum of dollar selling.''
Futures on the Chicago Board of Trade show a 23 percent chance the Federal Reserve will raise the 2 percent target rate for overnight lending between banks by at least a quarter- percentage point by its Dec. 16 meeting, down from 35 percent odds a week earlier. Policy makers next meet Sept. 16.
``Rate expectations have consolidated some, and oil has rebounded,'' said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut. ``There's not as much oxygen for the dollar as there once was.'' He still favors the dollar on evidence growth in Europe is slowing.

European data Friday includes the release of German June construction orders, although there is no fixed release time. At 0800GMT, Eurozone Jun current account hits screens, followed by Eurozone Jun industrial new orders data at 0900GMT and the Eurozone Aug BNB business survey at 1300GMT. UK data due at 0830GMT includes the Q2 GDP data, 2nd release, along with the June index of services. At 1000GMT, the UK Jul SMMT car production data is released.