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Dollar maintains rise against the euro
October 28, 2009
New York - The dollar maintained its uptrend against the euro on Tuesday after fresh data showing sagging consumer sentiment threw doubts on the pace of economic recovery in the United States.
The dollar is regarded as a safe-haven currency and negative perceptions on the economy usually prods investors to bail out of stocks and other relatively risky investments.
The euro fell to 1.4810 dollars at 2200 GMT in New York after ending at 1.4876 dollars late on Monday.
The dollar fell to 91.77 yen from 92.23 a day earlier.
Traders said the market was rattled by private data showing US consumer confidence falling sharply in October amid growing worries about rising unemployment.
The Conference Board reported on Tuesday its consumer confidence index declined for the second consecutive month, dropping in October to 47.7 from 53.4 in September. The index drop was much steeper than the 53.5 level expected by most analysts.
"With the greenback already benefiting from yesterday's technical correction, a negative US consumer confidence report prompted players to cover short US dollar positions as risk appetite dropped further in front of important US data later this week," said analyst Michael Woolfolk of Bank of New York Mellon.
Official gross domestic product figures for the US economy will be released on Thursday with most analysts saying GDP will see a 3.2 percent expansion, the first growth rate for the world's largest economy after a year of quarterly contractions.
Analysts say the risk appetite for stocks and other financial investments will worsen if US GDP figures did not live up to expectations.
"The possibility of downward surprise remains strong. A miss on the data could spur further risk aversion in equities and pull euro/dollar down to a test of 1.4800 as correction in the recovery trade looks likely to continue," said analyst Boris Schlossberg of Global Forex Trading.
He said that declining US consumer confidence indicated that "despite a pickup in overall economic activity consumers are becoming increasingly concerned about their personal prospect.
"Persistent fears of job losses have dampened consumer sentiment which in turn could result in a weaker-than-expected Christmas shopping season reducing growth estimates for fourth quarter," he said.
On Tuesday, the euro fell as low as 1.4770 dollars in the New York trading from overnight highs of 1.4927.
In late New York currency trading, the pound rose to 1.6380 dollars from 1.6307 a day earlier.
The dollar rose to 1.0210 Swiss francs from 1.0186. - Sapa-AFP
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