The dollar fell from near a three- week high against the euro as concern U.S. financial company losses will
widen led traders to reduce bets that the Federal Reserve will increase
borrowing costs in September.
The currency dropped for a second day as Minneapolis Fed President Gary Stern
told the Financial Times that the U.S. credit crunch will get worse.
The dollar declined even afterCongress passed legislation to prop up Fannie Mae and Freddie Mac, the two
largest providers of U.S.
mortgage financing. The U.S. Congress sent to the president legislation to stem
foreclosures for 400,000 homeowners and aid Fannie Mae and Freddie Mac, its
most sweeping effort to halt the biggest housing slump since the Great
Depression in the 1930s.
The dollar depreciated to an all-time low of $1.6038 per euro on July 15 on concern financial losses and
record oil prices may prolong the economic slowdown in the U.S.
The dollar may stay under pressure
on speculation that declines in home
prices and employment will make it difficult for the Federal Reserve to raise
interest rates. Analysts predict home prices fell by 16% in May from a year
ago, the most on record. U.S.
nonfarm payrolls fell by 75,000
in July, following a decline of 62,000 in June, according
to a separate survey of economists.
Futures traded on the Chicago Board
of Trade showed a 37% chance the Fed will increase its 2% target rate for
overnight lending between banks by at least a quarter- percentage point by
Sept. 16, compared with 43% odds on July 25.
In Europe attention will be on
inflation data from France
and Germany.
At 10:00
GMT CBI retail volume balance is due to come.
At В 14:00 GMT the focus will be on US consumer
confidence data. Analysts predict index rose to 50,4 in July after 50,1 month
earlier.