By Peter Garnham Published: July 2 2010 11:14 | Last updated: July 2 2010 11:14 The dollar stabilised on Friday after heavy losses in the previous session as investors awaited US employment data later in the session. On Thursday the dollar lost ground across the board, hitting its lowest level so far this year against the yen, as US economic data indicated that the country’s recovery was slowing. US manufacturing activity and home sales data came in weaker than expected, raising fears over a double-dip recession in the world’s largest economy and raising the prospect that the Federal Reserve might have to ease monetary conditions further. This followed a slump in US consumer confidence and falling car sales data earlier in the week. Analysts said the price action in the currency market was unusual, with the dollar failing to benefit from haven demand as global equity markets slumped. “Currency markets are fickle. The factors that dominate the market’s attention now are not usually the ones that will do so in the future weeks and months,” said Steve Barrow at Standard Bank. “Right now we could be forgiven for thinking that the market has moved on from concerns over eurozone sovereign debt to concerns over US growth and hence Fed policy.” Analysts said the focus of the currency market was now on the release of the US labour report later in the session, with consensus forecasts expecting non-farm payrolls to have dropped by 110,000 in June. Hans Redeker at BNP Paribas said a weak payrolls report would work against the dollar. He said declining consumer confidence, weakening car sales and the housing market reacting abruptly to the termination of tax rebates had left the impression that the US economic rebound witnessed over the past year was just driven by an inventory adjustment, and fiscal and monetary support. “As fiscal programmes terminate, with little chance of prolongation given the resistance of the Republican Party, the discussion has returned to a renewed easing of monetary conditions,” said Mr Redeker. “It is the prospect of quantitative easing that is driving the dollar lower.” However, after sharp losses on Thursday, the dollar gained 0.3 per cent to Y87.90 against the yen on Friday, climbed 0.7 per cent to SFr1.0669 against the Swiss franc and was flat at $1.5167 against the pound. The dollar, which on Thursday put in its worst performance in more than a year against the euro, was 0.1 per cent stronger at $1.2501 against the single currency.

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