September 1, 2002	Sunday	Jamadi-us-Saani 22,1423

NEW YORK, Aug 31: The dollar rose on Friday as traders ignored a survey showing US consumers were still unhappy and instead saw hope in robust consumer spending and positive manufacturing data.

Dollar bulls took heart from the Chicago PMI, which showed US manufacturing in the Midwest expanding for the seventh straight month in August. The index rose to 54.9 from 51.5 in July, exceeding forecasts.

The market already was biased toward dollar purchases after the government reported a surprise 1.0 per cent rise in consumer spending in July, a big enough increase to offset concerns sparked by a consumer sentiment report which showed confidence falling in August.

The University of Michigan’s August consumer sentiment index fell to 87.6 from July’s 88.1, against forecasts of a modest rise.

The increase in consumption was double the 0.5 per cent rise in June. It was also the biggest gain since October 2001 and indicated that, in July at least, Americans continued to spend even as sentiment surveys showed their mood was grim and despite flat income growth in that month.

Because business investment in the US hasn’t been that strong, the consumer has been one of the bulwarks of the economy. People have been worried about the weak confidence data, but the data show that we started off July with a solid rise in consumption, said Marc Chandler, currency strategist at HSBC in New York.

Chandler said the strong Chicago PMI could be a precursor of an improved Institute for Supply Management survey, which looks at factories nationwide. The ISM report is due next Tuesday.

Ian Shepherdson, chief US economist at High Frequency Economics, said that until we see the national (manufacturing index) next week, we won’t know if this rebound is merely a local Chicago-area story ... In the meantime, it is a welcome stock and dollar-boosting news.

The dollar’s strength were tempered late in the session when blue chip stocks eroded gains, leaving the Dow Jones industrial average down a small fraction of a percent. The Nasdaq composite was off a per cent and a half after several negative forecasts for the tech sector.

The dollar rose against the euro to 98.20 cents, up around 0.20 per cent from the prior day’s close.

Against the Swiss franc, the dollar was trading at 1.4971 francs, up 0.23 per cent on the session. Sterling was nearly flat at $1.5499.

The dollar firmed against the yen to 118.37 yen, up 0.14 per cent on the day.

With the dollar at the bottom of recent range, the decent data was enough to spur some pre-weekend position squaring ahead of the holiday, said Bob Lynch, currency strategist with BNP Paribas.

US financial markets will be closed on Monday for Labour Day. Bond markets shut early on Friday ahead of the holiday.

The dollar was unmoved by comments by Federal Reserve Chairman Alan Greenspan, who avoided talking about the near-term monetary policy outlook in a speech delivered to a conference in Jackson Hole, Wyoming.

Instead, Greenspan said that there was little the central bank could do to identify and combat emerging asset bubbles, such as the stock market run-up in the late 1990s.

Earlier in the session, a flood of Japanese economic data showed strong exports helped Japan’s growth in the April-June quarter but reinforced the view the country’s economic recovery was fragile.

Dealers said that while they took note of the Japanese data, which was mildly bearish for the yen, they were more focused on the possibility of Japanese repatriation ahead of the country’s half-year end in September.

Analysts said that in the coming week, the US ISM report and August payrolls data to be released on Friday would be the highlight.

Economists polled by Reuters on Friday said they expected the ISM index to rise to 51.6 in August from 50.5 in July. Many had upped their predictions after the strong Chicago PMI.

Using the Chicago ISM as a guide, the odds would favor a stronger ISM and other decent data for the month of August. That would imply a positive bias for the dollar, said Chandler.

US payrolls are expected to rise 37,000 in August after a 6,000 increase in July. The jobless rate is seen staying at 5.9 per cent.

But dealers said any gains for the dollar were likely to be tempered by concerns the US could be the target of violence around the time of Sept 11, the one-year anniversary of the hijacker attacks on the nation.—Reuters