The dollar fell from near a two-week high against the euro on
speculation the U.S. economy will enter a recession regardless of
whether Congress approves the Bush administration's $700 billion
bank-bailout proposals.
The euro rebounded after posting its biggest drop in seven years
against the U.S. currency yesterday as Senate Democrats and Republicans
agreed to vote today on the rescue plan. The British pound declined
against the euro after a report showed U.K. manufacturing contracted at
its fastest pace in 16 years.
``We don't think that what we've seen over the last month is the
beginning of a sustained dollar rally,'' said Martin McMahon, a
Zurich-based currency strategist for Credit Suisse Group. ``There are
still lots of problems for the dollar.''
Senate leaders vowed yesterday to revive a bill to buy distressed
assets from banks. The legislation was rejected two days ago by the
House of Representatives. The measures would give Treasury Secretary
Henry Paulson broad authority to buy troubled assets from financial
companies. Senators plan to include a provision that would raise the
limit on federal insurance for bank deposits to $250,000 from $100,000,
a move demanded by some of the rescue plan's critics.
The euro's gains came a day before a meeting of the European Central
Bank at which policy makers led by Jean-Claude Trichet will probably
keep interest rates at 4.25 percent.
``I don't think the euro can get a lot of traction out of Trichet
tomorrow,'' said Jeremy Stretch, a strategist in London at Rabobank
International, the third-largest Dutch bank. ``If he is seen to be
hawkish, the euro will fall and if he is seen to open the gates, I
think the euro will slide on that basis as well. We are in an
environment where pro-growth policies are more highly prized than
anti-inflation'' policies, he said.
The pound declined versus the euro after Reuters reported the Chartered
Institute of Purchasing and Supply's index of manufacturing fell to 41
in September, from 45.1 in August, the lowest since January 1992.
Economists predicted 45. The reading has held below 50, signaling
contraction, for five months.
The yen fell against all 16 most actively traded currencies after the
Bank of Japan's quarterly Tankan survey showed large manufacturers
turned pessimistic about their prospects in September for the first
time in five years. The Japanese currency weakened to 150.07 per euro,
from 149.56 yesterday.