Dollar up in thin trade

The dollar was slightly firmer Monday in quiet trade, recovering some of the ground lost last week after a series of weak US economic data. With US markets closed for a public holiday Monday, there was little incentive to take aggressive positions, especially with more US figures to come as players try to get a line on the economic outlook.

The euro has come under pressure on expectations the European Central Bank will lower interest rates this year. European Central Bank (ECB) Governing Council member Christian Noyer said in an interview released on Sunday euro zone growth might be weaker than hoped as a result of market turmoil but he saw no big setback.

The dollar was finding some support on gains in Asian stock markets as well as hopes that the Federal Reserve's rate cuts and the newly enacted fiscal stimulus package could rekindle U.S. economic growth later this year.



Trading activity was slow on Monday, with U.S. financial markets closed for the Presidents Day holiday. Economic data due this week includes the U.S. consumer price index and housing starts on Wednesday.



The dollar slid on Friday after data showed U.S. consumer sentiment fell to a 16-year low, reviving fears that the economy was slipping into a recession while reinforcing expectations for more Fed rate cuts.



Concern about more fallout from credit market turmoil and bigger losses at financial firms have hurt the U.S. currency, driving it back near a record low hit against the euro last year.

According to a survey released on Friday, the consumer sentiment index fell to 69.6 in mid-February from 78.4 in January, the lowest since February 1992.

Meanwhile, the US Trade Deficit narrowed in 2007, for the first time in six years, to 711.6 billion dollars from 758.5 billion in 2006, according to the Commerce Department.

Also, report from the US Labor Department showed initial claims for state unemployment benefits dropped by 9,000 to 348,000. However, the four-week moving average of new claims increased 12,000 to reach 347,250.

An unexpected rise in US retail sales had pushed up the dollar on Wednesday. The release by US Commerce Department showed retail sales rose 0.3 % in January.

Billionaire investor Warren Buffett had offered to reinsure 800 billion dollars in municipal bonds backed by three insurers hard hit by the US mortgage and credit crunch, a move that might help ease the recent credit market turmoil.

But the National Federation of Independent Business index of small-business optimism fell by 2.8 points to 91.8 in January, the lowest since January 1991.

The Bank of England had cut its benchmark interest rate by 25 basis points as expected, and the European Central Bank held rates steady on Feb 7th.

The G7 statement offered no significant changes from the group's October statement regarding currencies, but has warned that the global economy faces risks due to the US housing market, tight credit markets and high oil and commodity prices.

Annual euro-zone inflation remained at 3.2% in January, above the ECB's medium-term target of around 2%.

Data from the US Labor Department released last week indicated productivity growth of US non-farm businesses slowed significantly, to a 1.8% annual rate in the fourth quarter from a 6% rate in the third quarter, which dampened the sentiments of investors in the dollar.

In a grave effort to prevent a global market meltdown in financial markets and a possible recession in the US economy, the Fed had lowered its lending rate by 75 basis points to 3.50% - a rare move between formal meetings of the central bank's policymakers in January; and again lowered the rate to 3 percent January 30th. The 75 basis point has been the largest cut in the fed funds rate since 1990.



The fear of economic slowdown spreading to other nations most of the policy makers are closely watching the economy.

Medium Term Outlook Active trading above 1.4510 is the sign of weakness in dollar. Supports are 1.4630, 1.4755, 1.4788, 1.4966 and 1.5052. Resistances are 1.4450, 1.4320 and 1.4277. More weakness can be expected above 1.4968

In spot, dollar closed at 1.4657(1.4678) against the euro, after trading in the range 1.4690 – 1.4609.