The dollar rose to an 11-month high against the euro
as crude oil fell and Lehman Brothers Holdings Inc.'s plan to sell
assets assured investors.
The yen
fell against most of the major currencies on bets the Wall Street
firm's attempt to shore up capital will encourage traders to buy
higher-yielding assets funded by loans in Japan.
The euro dropped
earlier as the European Commission cut its growth forecast and
Luxembourg Finance Minister Jean- Claude Juncker said the currency is
overvalued.
``Crude oil drifting back down again is
favorable for the dollar,'' said Michael Woolfolk, senior currency
strategist in New York at Bank of New York Mellon, the world's largest
custodial bank, with more than $23 trillion in assets under
administration. ``The market is taking some comfort here.''
The
economy will probably stagnate this quarter after shrinking in the
previous three months for the first time since the euro was introduced
in 1999, the European Commission said today. The Brussels-based
commission cut its forecast for economic growth to 1.3 percent this
year, from 1.7 percent earlier, and signaled the 2009 outlook may also
be lowered.
The euro is still ``overvalued'' and Europe
faces ``a risk of a technical recession,'' Juncker said today at a
hearing before the European Parliament's economic and monetary affairs
committee in Brussels.
``The
underlying trend is still in favor of the dollar, even if we're in for
a period of consolidation,'' said Marc Chandler, global head of
currency strategy at Brown Brothers Harriman & Co. in New York. Crude oil
for October fell 1.4 percent to $101.85 a barrel, while gold futures
for December delivery dropped 3.1 percent to $767.20 an ounce.
European data
starts at 0600GMT with German wholesale prices data, followed at
0645GMT by Q2 final payrolls data from France, which is expected to
come in at -0.1% q/q, +1.1% y/y. At 0715GMT, ECB Vice President Lucas
Papademos is due to deliver a keynote speech at the "Hamburg Summit
2008: China meets Europe," in Hamburg. The ECB publishes its monthly
Bulletin at 0800GMT, at the same time as ECB Governing Council member
Yves Mersch holds a press conference, in Luxembourg. US data starts at 1230GMT with the weekly jobless claims data,
the international trade balance for July and the import/export price
index for August. Initial claims are expected to fall 4,000 to 440,000
in the September 6 week, while the international trade gap is expected
to widen to $58.0 billion in July. Imported energy prices rose 4.0% in
the month, while Boeing reported slightly less airline deliveries to
foreigners.
At 1800GMT, the US Treasury is expected to post a $105.0 billion gap in
August, only modestly smaller than the $117.0 billion gap in
August 2007. With one more month left in the fiscal year, the
year-to-date gap remains wider than a year earlier due to slower revenue
growth and stronger outlay growth. At 1845GMT, Fed Vice Chairman Donald
Kohn is due to appear on Brookings Institution panel on the U.S.
economy, in Washington.
