The dollar gave back some of its recent gains yesterday amid nervousness ahead of a US interest rate decision next week and a deadline for US chief executives to certify their financial statements.
But news of another multibillion-dollar hole in the accounts of bankrupt US telecom giant WorldCom was greeted with little more than a yawn by most traders and the impact of preliminary second-quarter US productivity data, which revealed a 1.1 per cent gain in second-quarter 2002, down sharply from the 8.6 per cent gain in the first quarter, was muted. While analysts said the results were encouraging, the report offered limited support to the dollar.
In late-day deals, the euro was trading at $0.9719, compared with $0.9664 late on Thursday in New York. The dollar was worth 120.11 yen from 120.97.
Bank of America economist Ms Monica Fan said the euro was clawing back recent losses against the US unit as the market scaled down expectations that the US Federal Reserve would cut interest rates when its policymakers meet on Tuesday.
She said the dollar should also come under pressure in the run-up to a deadline on Wednesday set by US regulators for the chief executives of 947 publicly traded US companies to certify their companies' recent financial statements.
Ms Fan said only 88 of those companies had restated their accounts, "so we can expect a tsunami of restatement announcements over the next week and no change in the rates will give investors further reason to short \ dollars".
"There's been a large bout of profit taking on euro, yen and sterling in the last week and I think we'll see a resumption of that bear market in the dollar next week," she added.
But the analyst noted that there were several factors on the horizonthat could stymie the recovery of the euro. "One of the hurdles for the euro to return back to parity is that increasingly European data are coming on the soft side of expectations, so it's been disappointing," she said.
She also pointed to the dangers of another Irish "no" vote in the referendum to adopt the EU Nice Treaty later this year, while the European Central Bank appears reluctant to cut interest rates. and Germany faces a federal election in September. - (AFP)
