Marginal recovery in Dollar

Dollar finished marginally higher against the Euro on Friday due to short-covering, after heavy falls earlier in the week that saw the greenback record new all-time low versus the European currency.



Pressure due to downbeat economic data from the US and increased the concerns over the US economic outlook continued to keep the Dollar at the lower levels.



The latest data released on Friday showed US consumer sentiment dropped to 70.8 in February from 78.4 in January, according to the Reuters/University of Michigan survey. The sentiment index has fallen by almost 30% since the peak in January 2007, according to the survey.



According to the report by US Labor Department, initial claims for state unemployment benefits rose by 19,000 to 373,000 in the week ended Feb 23. However the four-week average of initial claims fell by 1,250 to 360,500. The continuing claims increased by 21,000 to 2.81 million in the week ended Feb 16, the highest level in more than two years.



The Commerce Department reported a sharp slowdown in US economic growth in the fourth quarter. The economy grew at a 0.6% annual rate, unrevised from last month's estimate. The yearly economic growth in 2007 was an inflation-adjusted 2.2%, at the weakest pace in five years, after a 2.9% gain in 2006.



Weak US home sales data is indicating weakness in the economy has spread into the housing sector. The new U.S. single-family home sales fell in January to the lowest rate in nearly 13 years and housing inventories swelled, despite falling prices.



In the durable good sector, orders for long-lasting domestic manufactured goods recorded their biggest drop in five months in January, according to a government report also adding to pressure on dollar.

According to the release by US Labor Department, consumer prices rose at a seasonally adjusted 0.4% last month. The US core consumer price index rose 0.3 % in January, which is the strongest monthly rise since June 2006.

The US Commerce Department reported a small gain in the nation's pace of construction on new homes during January, though without any sign of recovery in building permits. Housing starts rose last month by 0.8%, to a seasonally adjusted annual rate of 1.01 million.

The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.

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.

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.

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.