RTRS: Dollar down as U.S. economy woes take center stage
The dollar edged lower in thin pre-holiday trade on Tuesday after data confirming that the U.S. economy contracted in the third quarter stoked concern about a deep and persistent recession.
Government data showed the economy shrank 0.5 percent between July and September as consumers and businesses cut spending, and the report kept the dollar under broad pressure.
"The past couple of quarters have been really weak and if anything, I'm afraid it may indicate a really bad fourth quarter," said Kurt Karl, chief U.S. economist at Swiss Re in New York. "Some economists are forecasting a 6 percent drop in this quarter. Our forecast is for minus 4.2 percent."
Data on sales of existing and new U.S. homes due later on Tuesday are expected to show more housing market woes while investors are bracing for more bad news about consumer sentiment from the Reuters/University of Michigan survey.
Analysts said the data, together with razor-thin liquidity, could aggravate market movements, putting even more selling pressure on the U.S. currency.
The euro was up 0.4 percent at $1.3995. It climbed above $1.47 last week. The euro rose 0.3 percent to 126.08 yen. The dollar was unchanged at 90.10 yen, not far from a 13-1/2-year low just above 87 hit last week. Against the Swiss franc, the dollar fell 0.8 percent to 1.0840 francs.
Sterling was 0.2 percent lower at $1.4812, weighed down by its own data showing the UK economy shrank 0.6 percent in the third quarter of 2008.
Adding to the dim view of the U.S. economy was news that big U.S. manufacturers were slashing costs, and that ratings agencies dropped their ratings on debt held by U.S. automakers which have just received a lifeline from the U.S. government.
Caterpillar Inc said it would cut white-collar pay by up to 50 percent and Textron Inc announced 2,200 job cuts worldwide.
Concerns over the prospects for U.S. automakers also mounted as ratings agency Standard & Poor's cut its unsecured debt rating on General Motors (GM.N) to 'C' and Moody's lowered ratings on Ford (F.N) to 'Caa3'.
"We have had a litany of bad news on the U.S. economy over the past 24 hours and this continued negative news will weigh on the dollar," Bank of New York Mellon head of currency research Simon Derrick said.
A worsening economy prompted the Federal Reserve to slash U.S. interest rates to near zero last week, erasing what was left of the dollar's yield appeal.
