Dollar comes under renewed pressure; heavy data week eyed

12.11.06, 6:22 AM ET

LONDON (AFX) - The dollar came under renewed pressure after the lift from a stronger than predicted US jobs report last Friday proved fleeting.

The beleaguered currency faced sharp swings in the wake of the jobs report -- rising at first before losing all the ground it covered and then some more. The euro set a new high for the year at 1.3367 usd in the process.

It was all change early in the Asian trading session with the dollar again recovering lost ground only to fall back eventually.

'We continue to expect the dollar to extend its down trend over the medium term despite the current corrective rebound following the better than expected US non-farm payroll data on Friday,' BNP Paribas (other-otc: BNPZY.PK - news - people ) analysts said in a research note.

Steve Pearson (nyse: PSO - news - people ) at HBOS said the confused price movements suggests a clear-out of technical positions, especially since many investors were holding short dollar positions.

'The current move has, in our view, always been as much momentum as macro driven,' he said.

On the fundamental front, the strong US jobs data led to a scaling back in rate cut expectations. Still, it remains to be seen if this trend will continue.

Several key pieces of US data are due this week, including crucial inflation, retail sales and trade figures.

'With markets largely focused on the perceived cyclical divergence between the US and the euro zone, the dollar is most at risk from potentially soft CPI and retail sales data,' said Pearson.

That aside, markets are also keeping an eye the Fed's rate verdict Tuesday.

The Federal Reserve Board's Federal Open Market Committee is widely expected to keep its key federal funds rate at 5.25 pct, where they have been since late June.

All eyes will be on the language in the accompanying statement, which is expected to continue to express a greater concern about rising inflation than a slowing economy.

In the meanwhile, markets paid scant attention to weak French industrial production numbers. Seasonally adjusted French industrial output in October was down 0.1 pct from September, confounding predictions of an increase.

Separately, the pound was well off the highs seen over the past few weeks as investors braced for a heavy flow of UK data this week. Many believe the pound has already set its highest levels for the year and that it may be vulnerable to weak data releases.

Any moderation in UK inflation, especially if coupled with weak retail sales figures this week, will likely weigh on the pound

'Our view this week is that UK data - most especially CPI and retail sales - will disappoint,' said Pearson at HBOS.

London 1029 GMT Singapore 0640 GMT

US dollar

yen 116.90 up from 116.67

sfr 1.2060 down from 1.2068


usd 1.3190 up from 1.3171

yen 154.30 up from 153.67

sfr 1.5910 up from 1.5898

stg 0.6767 up from 0.6750


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yen 228.00 up from 227.62

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Australian dollar

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