Dollar under pressure over bleak prospects

London, Dec 3: The dollar remained under pressure against the euro on Monday, weighed by concerns that optimism about the prospects for US recovery have been overdone and renewed jitters over Argentina.

Meanwhile, the yen was marked lower against both the euro and the dollar as rumours swirled of a possible downgrade of Japan’s sovereign debt by Moody’s Investors Service and a three per cent fall in Japan’s benchmark Nikkei stock index.

The dollar suffered losses against the euro on Friday after revised data showed the US economy shrank by 1.1 per cent in the third quarter and a weaker than expected Chicago Purchasing Managers’ Report.

“There’s some concern hopes of a recovery in the US in the first half of next year may be premature and that’s hurting the dollar,” said Jeremy Hawkins, chief economic adviser at the Bank of America.
“The situation in Argentina hasn’t done anything to deflect this.
That’s also weighing on the dollar.” Argentina has imposed a $250 per week limit on cash withdrawals and restriction on the transfer of funds abroad among other measures to stabilise its economy.

At 0822 GMT, the dollar was trading around $0.8957 per euro, little changed on the day, and not far above 2-1/2 week lows set on Friday after the data.

— Reuters

The dollar was very slightly higher against the yen around 123.56 yen as was the euro at 110.65.
Traders said Enron Corp’s filing for bankruptcy was also hurting dollar sentiment as investors worried about the extent of exposure by US institutions.
Traders said they were waiting for key US data for more clues on the state of the US economy.
First in line is the National Association of Purchasing Management (NAPM) index for November which is expected to show an improvement over the previous month’s extremely weak figures.
Economists polled by Reuters forecast the NAPM to firm to 41.8 from 39.8 in October.
But the Chicago purchasing managers’ index, seen by some as a guide to the National index, fell in November to its lowest level since July, casting doubt on the prospects of a quick economic recovery.
“The last set of figures was extremely bad, so the market is expecting a rebound. If the figures turn out worse than expected, the dollar could easily weaken, at least in the short term,” said Satoru Ogasawara, analyst at Credit Suisse First Boston in Tokyo.
Euro zone purchasing manager indices are expected to be soft.
But analysts said the dollar was also looking quitevulnerable against the euro on a technical basis.