Dollar slips amid disappointing US economic news as Fed rate-setting meeting begins
June, 25th 2008
The dollar slipped Tuesday after a report showed an unexpectedly sharp drop in U.S. consumer confidence in June.
Investors were awaiting the Federal Reserve's decision on the benchmark interest rate as its two-day meeting began Tuesday. Economists expect policy makers will leave the key rate unchanged, though they may potentially signal more concerns about inflation.
The euro bought $1.5579 in late New York trading, up from $1.5499 the night before.
In other currencies, the British pound strengthened to $1.9697 from $1.9599 late Monday, while the dollar remained basically flat against the Japanese currency at 107.90 yen, compared with the 107.84.
The Conference Board, a private industry group, said that U.S. consumer confidence fell in June to the fifth-lowest level ever and far lower than economists had expected. The index plunged to 50.4 this month, down from 58.1 in May.
The survey is based on a sample of 5,000 U.S. households. Separately, U.S. home prices in all 20 cities tracked by the Standard & Poor's/Case-Shiller home price index posted annual declines, hitting levels not seen since August 2004. The narrower 10-city index declined 16.3 percent in April, the largest drop in its more than two-decade history.
``The market has been stuck in relatively tight ranges for quite some time, so though the dollar had a knee-jerk reaction to these reports it is not likely traders will do a whole lot in the midst of the Fed meeting,'' said David Solin of Foreign Exchange Analytics in Essex, Connecticut.
Consumer confidence in Germany _ Europe's largest economy _ also was down, the Nuremberg-based GfK agency reported. But the GfK's report of a drop in its forward-looking assessment for July, hitting the lowest level since December 2005, did little to weaken the euro.
``Rising fear of inflation, combined with the sustained crisis in the financial markets, a strong euro and a weaker global economy mean that consumers are not very upbeat in their assessments of future economic growth,'' GfK's report said.
All three of GfK's subindexes, which refer to current conditions, also fell.
The GfK is based on 2,000 consumer interviews, conducted each month on behalf of the European Commission.
In other late trading, the dollar fell to 1.0406 Swiss francs from 1.0464, and slipped to 1.0128 Canadian dollars from 1.0164