Note: You are reading this message because your web browser does not support current web standards. While you may still view and utilize our content, your experience on our site would be greatly enhanced if you were to upgrade to a more modern web browser.

< Back :: This Morning

This Morning

Yesterday's Forex Strategy involved looking for an upside move on the USDCHF and a downside move on EURUSD.  As of this morning, the USDCHF has reached target while the EURUSD is close to it.

Financial reporters can now toss in their two cents, guessing at what could be spurring the move.

Dollar Buoyed by US Jobs Optimism, Maintains Gains.

LONDON, March 2 (Reuters) - The dollar headed towards last week's four-week high on the euro and gained versus the yen on Tuesday, buoyed by optimism that U.S. jobs data later this week may show sturdier improvement over past months' figures.

Dollar bulls have taken heart about the U.S. labour market after the jobs component of a February U.S. manufacturing index released on Monday gave its highest reading since 1987.

Later on Tuesday, a U.S. job cuts report from outplacement firm Challenger, Gray & Christmas will garner market attention, with investors looking for additional signals of improvement in the labour market -- so far the weak link in U.S. recovery.

"Lots of people have latched on to (Monday's) employment component and are suggesting that Friday's non-farm payrolls data may be slightly more upbeat than first thought," said Mark Henry, currency strategist at GNI in London.

By 1113 GMT the euro had slipped 0.4 percent on the day to $1.2395 , not far above Friday's four-week low of $1.2370.

The dollar had gained 0.6 percent on the yen to 109.65 yen , not far below a 109.83 three-month high set last week.

It was also 0.7 percent higher on the Swiss franc and 0.5 percent stronger on the day against the British pound .

Federal Reserve Chairman Alan Greenspan talks about the current account at 1730 GMT and his comments will be closely watched for any clues to the timing of higher interest rates.

RATE DEBATE

Interest rate expectations in the euro zone and the United States are set to be a key determinant of euro/dollar direction this week.

Jobs growth is a significant factor in the Fed's consideration about when to raise U.S. interest rates from one percent -- their lowest since 1958 and one reason why the dollar has been under continuous selling pressure for months.

Dollar bulls hope a strong reading in Friday's payrolls data will give the U.S. currency a boost, helping it build up recent gains that took it up from record lows set at $1.2927 only two weeks ago.

"Clearly the market is a little bit more upbeat about the dollar than it has been," said Mitul Kotecha, head of global foreign exchange research at Credit Agricole Indosuez in London.

"Today's (Challenger) data may be secondary but it will be watched. If we see improvement in job cuts it will be a positive sign for payrolls."

On the other side of the coin, recent business confidence and inflation data out of euro zone economies indicate euro strength is starting to weigh on the pace of economic recovery.

The European Central Bank meets on Thursday. The market does not expect it to lower the cost of borrowing this week but there is jitteriness over potential surprises and what ECB President Jean-Claude Trichet may say at his regular news conference scheduled for Thursday.

Unemployment in the euro zone held steady at 8.8 percent in January. Retail sales in the bloc's biggest economy, Germany, showed a rise of 3.1 percent on the month in January but fell by one percent on the year while in France consumer confidence fell unexpectedly in February.

In Japan, the Nikkei share average <.N225> hit a 21-month high but it failed to boost the yen, with some market players suspecting the Japanese authorities may have been in the market.

Japan has sold at least 10 trillion yen ($92 billion) this calendar year to prop up the U.S. currency and prevent yen strength from eroding its export-led recovery.

The Bank of Canada is expected to cut its main rate to 2.25 percent from 2.5 percent. The greenback was up a quarter of a percent on the Canadian dollar at C$1.3409.

04.03.02 07:41 #