Dollar extend gains

Dollar extended gains against the euro and closed at 1.5794 (1.5780) on Friday.

As per the US Commerce Department release on Friday, inflation moderated in February, with consumer prices rising just 0.1% for the month.

The greenback found some support in the report from US Labor Department released on Thursday, which revealed that initial claims for state unemployment benefits fell 9,000 to 366,000 in the week ended March 22. However the four-week average of initial claims rose 1,750 to 358,000.

Also continuing claims for benefits fell 5,000, to 2.85 million for the week ended March 15. The four-week average of continuing claims rose 25,250 to 2.82 million.

The US economy grew at 0.6 % annual rate in the fourth quarter according to the Commerce Department estimate made public on Thursday. This was as per expectations and consistent with the two previous estimates, but the slowest pace since 2002.

The US Commerce Department reported Wednesday that sales of new homes in the US fell to a 13-year low in February, dropping 1.3% to a seasonally adjusted annual rate of 590,000.

US consumer confidence index had fallen in March to 64.5 from a revised reading of 76.4 in February, according to a US Conference Board release on Tuesday.

But the report from National Association of Realtors released on Monday had shown that resale of homes rose 2.9% to a seasonally adjusted annualized rate of 5.03 million. The rise was above expectations, and the first in seven months.

The Federal Reserve had cut its benchmark interest rate by 75 basis points in its last meeting.

The Commerce Department had reported a drop in US housing starts in February by 0.6 percent to a 1.065 million unit annual rate, down from 1.071 million units in January.

Another release showed the total industrial output in US fell 0.5 percent in February, much steeper than the expected rate of 0.1 percent.

US homebuilders' confidence held steady in March. The National Association of Home Builders (NAHB) Housing Market Index for March remained unchanged at 20.

The US Commerce department reported a worse-than-expected 0.6 percent fall in the Retail Sales in February.

The Beige Book survey of the Fed reported softening or weakening in the pace of business activity in 8 of the 12 Fed regional districts; and subdued, slow or modest growth in others, confirming the slowdown in US economy since the start of the year.

Federal Reserve Chairman Ben Bernanke had given a grim assessment of the U.S. housing sector, adding to mounting fears of recession.
The Fed had lowered its 2008 growth forecast to 1.3 % - 2 %, from a forecast of 1.8 % - 2.5 % in November.
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.
Medium Term Outlook
Expecting a short-term recovery in dollar if it sustains below 1.5725. Supports are 1.5909, 1.6148, 1.6420. Resistances are 1.555, 1.5380, 1.5220 and 1.5110. But if it trades above 1.5910, more weakness can be expected.
In spot, dollar closed at 1.5794 (1.5780) against the euro, after trading in the range 1.5839 – 1.5737.
Last day, DEUR June traded in the range 157.73 – 156.90 and closed at 157.47.