MW: Dollar edges lower as selling pressure continues
NEW YORK (MarketWatch) -- The U.S. dollar edged lower Tuesday for a third day, weighed by ongoing hopes that the worst of the global recession is over, strategists said.
The dollar index , which measures the performance of the greenback against a basket of currencies, fell to 78.845, down from 79.062 in late North American trading Monday.
The dollar came under broad selling pressure on Monday as equity and commodity markets surged. Those moves reflected rising appetite for risk on growing expectations the worst of the global recession has passed, analysts said.
They cautioned, however, that markets may be getting ahead of the game, leaving room for a near-term reversal of recent moves in the currency markets.
"We are less optimistic at this stage and suggest taking some profit from pro-risk trades," wrote strategists at BNP Paribas.
Against individual currencies, the dollar was mixed.
The euro traded at $1.4227 against the dollar, up slightly from $1.4170 in Monday afternoon action in the U.S.
The dollar slipped to 95.74 yen versus the Japanese currency, down from 96.46 yen.
Analysts said remarks by U.S. Treasury Secretary Timothy Geithner in Beijing helped support the dollar, prompting some modest short covering. See more on China.
Geithner said he believes the Chinese expect the dollar to remain the world's principal reserve currency, "for a long period of time, as do we," according to news reports.
Oil futures edged lower, while gold futures were little changed.
"The sharp rise in bond yields and commodity prices needs to be put in the context of a weak global economic recovery. Although Asian economies are the outperformers of the recovery, the consequences of this on commodities and yields will hurt fragile Western economies," they said.
In the euro zone, the statistics agency Eurostat said the unemployment rate rose from 8.9% in March to 9.2% in April, the highest level since 1999.
The British pound retreated after hitting a seven-month high versus the dollar on Monday. Read about sterling's recent rally.
The British pound lost ground, falling to $1.6439 versus the greenback from $1.6444.
"Sterling has had a tremendous run on the rails and profit taking was inevitable. The UK's economy looks very brittle and consequently sterling is punching above its weight," said David Buik, a strategist at BGC Partners. "Sterling will be at $1.50 by October."
The Bank of England on Tuesday said mortgage approvals rose to 43,200 in April from 40,000 in March, beating expectations for a rise to 41,000.
"These signs of improvement pose nowhere near enough reason for the Bank of England's Monetary Policy Committee to consider raising the bank rate in the short term," wrote Charles Davis, economist at the Center for Economic and Business Research.
The bank rate is likely to remain at 0.5% until at least spring 2010, he said. The bank's Monetary Policy Committee concludes its monthly policy meeting Thursday and is widely expected to leave its key rate unchanged and to not expand its 125 billion pound quantitative-easing program.
