The dollar may extend its drop against the euro on speculation a weakened U.S.
economy will discourage the Federal Reserve from increasing borrowing costs
this year.
The U.S. currency fell
Monday as New York state
manufacturing shrank in June and crude oil prices touched a record high of
$139.89 a barrel. The Federal Reserve Bank of New York's general economic index, a gauge
of manufacturing, decreased to minus 8.7 in June from minus 3.2 the prior month. Readings less than zero
signal contraction.
Fed funds futures on the Chicago Board of Trade
show a 68 percent chance the U.S.
central bank will increase the 2% target lending rate by at least a
quarter-percentage point at its August meeting. There are 26% odds policy
makers will lift the rate to 3% by December.
The yen fell to an eight-month low versus the
euro as reduced currency volatility encouraged investors to buy higher-yielding
assets funded by low-cost loans in Japan.
EUR/USD printed
lows on $1.5344 before starting to rebound to $1.5520.
GBP/USD held
the most of the day within the narrow $1.9620/60 range.
USD/JPY fell
from Y108.60 to Y107.90. Later rate set stable around Y108.00/30.
In Europe
attention will be on ZEW economic expectation index with analysts
predict index fell to -43,0
in June versus -41,4 month earlier.
Later focus will be on US data, including
Housing starts, Building permits, PPI and Industrial production.