Thursday, June 5, 2008

Dollar Trades Near Two-Week High Against Euro on U.S. Services

Dollar Trades Near Two-Week High Against Euro on U.S. Services

June 4 (Bloomberg) -- The dollar traded near a two-week high against the euro after a report showed U.S. services industries expanded in May at a faster pace than forecast, indicating the economy is weathering record gasoline prices.

``The tone is still dollar-bullish for the day,'' said Boris Schlossberg, senior currency strategist in New York at, an online currency dealer. ``The non-manufacturing sector is still expanding.''

The dollar traded at $1.5451 per euro at 10:30 a.m. in New York, compared with $1.5445 yesterday, when it touched $1.5411, the highest level since May 14. The dollar was at 105.08 yen, unchanged from yesterday. Japan's currency traded at 162.35 per euro, compared with 162.32.

The Institute for Supply Management's index of non- manufacturing businesses decreased to 51.7 last month from 52 in April. The median forecast of 73 economists surveyed by Bloomberg News was for a drop to 51. A reading of 50 is the dividing line between growth and contraction.

Australia's dollar rose against all of the other major currencies after a government report showed the economy grew in the first quarter at twice the pace economists forecast. The Aussie rose 0.9 percent to 96.07 U.S. cents after touching 94.87 U.S. cents, the lowest level since May 16. It strengthened to 96.54 U.S. cents on May 21, the highest level since it began trading freely in 1983.

Company Hiring

A private report based on payroll data showed U.S. companies unexpectedly added jobs in May. The 40,000 increase followed a revised gain of 13,000 for the prior month that was more than previously estimated, ADP Employer Services said. The median forecast of 25 economists surveyed by Bloomberg News was for a reduction of 30,000.

The dollar touched a two-week high against the euro yesterday after Federal Reserve Chairman Ben S. Bernanke said via satellite to a conference in Barcelona, Spain, that policy makers are ``attentive'' to the weakened dollar's effect on inflation. He said interest rates are ``well positioned'' to promote growth and stable prices, signaling the Fed is done cutting interest rates.

``We do like the dollar higher, but a little too much was made out of Bernanke's comments,'' said Win Thin, a New York- based currency strategist at Brown Brothers Harriman & Co., in an interview on Bloomberg Television. ``They caught the short term players wrong-footed. There was a lot of short squeezes,'' meaning traders had to buy the dollar to exit bets that it will fall, minimizing losses.

Futures on the Chicago Board of Trade show a 63 percent chance the Fed will raise the 2 percent target rate for overnight lending between banks by at least a quarter-percentage point by December, compared with 59 percent odds a month ago.

The dollar has increased 3.5 percent since touching the all-time low of $1.6019 per euro on April 22, as the Fed signaled it will stop cutting interest rates. It will strengthen to $1.50 against the euro and trade at 105 yen by the end of the year, according to the median forecast of 41 economists surveyed by Bloomberg News.