Reply #18: Dollar climbs, lifted by upbeat U.S. data [View All]

[54anickel]

http://www.forbes.com/markets/newswire/2004/02/04/rtr1241759.html

NEW YORK, Feb 4 (Reuters) - The dollar rose moderately against major currencies on Wednesday, following release of firmer-than-expected U.S. economic data that reinforced expectations of a stronger U.S. recovery this year.

A stronger economy implies attractiveness of U.S. assets like stocks, therefore enhancing the allure of holding dollars.

But the greenback's gains were tempered by a slight drop in the employment index component of the U.S. Institute for Supply Management (ISM) non-manufacturing survey. The employment index slipped to 53.4 in January from 54 in December.

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Analysts say expectations of an interest rate increase should boost the dollar given that dollar is out of favor in currency markets in part because official U.S. rates are lower than rates elsewhere.

"Any positive number in the U.S. economy raises the expectations that we are going to see a Fed hike sooner rather than later, and that gives us the basis for dollar optimism," said Carl Weinberg, chief economist at High Frequency Economics in New York.

But the upbeat U.S. data was balanced by equally robust numbers out of the euro zone, limiting the dollar's gains. The Reuters Eurozone Business Activity Index rose to 57.3 from 56.6 in December, adding evidence that business activity in the region's services sector picked up speed, although it remained below a three-year high of 57.5 in November.

FOCUS STILL ON G7

The market's focus is still on the Group of Seven finance minister's meeting in Florida on Feb. 6-7.

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