May 12, 2002	Sunday	Safar 28, 1423

NEW YORK, May 11: The dollar was easier on the day on Friday but looked set to end higher on the week, leaving dealers to pore over technical charts for direction while awaiting next week’s heavy US data calendar for clues on fundamentals.

By mid afternoon, the euro was 0.47 per cent higher on the day against the dollar while the greenback had given back half a per cent on the yen as US stock prices declined for a second day following a spectacular rally on Wednesday.

Dealers said, barring a huge change in its fortunes, the euro was unlikely to revisit this week’s highs of 91.78 cents before the close of trade, meaning that for the first time in a month it would close below the week’s peaks.

By late afternoon, the euro was at 91.32 cents, far below the 91.78 level, which was a seven-month high.

That could be a bearish signal for a euro that has been whipping the dollar soundly since early April.

What we might see is something like the rally of last summer or of January 2001, said Andrew Chaveriat, technical analyst at BNP Paribas. All of those rallies had sharp weekly gains on the euro, which ended up being either the top of a rally or a new phase of sideways, choppy, range trading.

That’s not to say the euro couldn’t make new highs but it could be very volatile and they would be marginal highs.

But the fundamentals picture remains mixed.

The dollar has been falling on worries the US recovery was proceeding too sluggishly to boost corporate profits, thus encouraging capital to seek better returns elsewhere.

What we have been seeing, and what we will continue to see, is a willingness on the part of both domestic and foreign investors to diversify out of the dollar in a move away from a wholesale dependence on US assets, said John McCarthy, director of foreign exchange at ING Barings Capital Markets.

But other options were not compelling. Europe was facing moderate growth at best. Japan, despite clear signs of a pick-up, still had to deal with deeply entrenched structural problems, he said.

What was needed was US economic data that could confirm the recovery’s pace, and suggest the outlook for equities.

The dollar showed little reaction to the price data.

Against the yen, the dollar slipped to 127.63 by the afternoon as it became clear that rumors Moody’s Investors Service aimed to downgrade Japan on Friday would fail to turn into reality.

The Moody’s watch would resume on Monday, dealers said.

But it was not all bad news for the yen.

Marc Chandler, currency strategist at HSBC Markets, said the options market was signaling a change in sentiment favoring the yen, with yen calls now at a premium.

It suggests that a lot of people in the market have really pulled back their extreme bearishness toward the yen, partly as the Japanese recovery stages a cyclical recovery, he said.—Reuters