June 29, 2003	Sunday	Rabi-us-Sani 28,1424

NEW YORK, June 28: The dollar notched limited gains against the yen and stirling on Friday but lost ground to the euro even after an upbeat June consumer sentiment survey, with trading patterns dominated by end-of-quarter positioning.

The euro gained slightly against the dollar and yen, but surged higher against sterling after a report showed Britain’s economy expanded at its weakest pace in 11 years in the first quarter as businesses and consumers retrenched ahead of the war in Iraq.

You had a direct influence from the weak GDP numbers from the UK and I think that had an influence on the crosses and gave a little support to the euro against sterling, said Mike Malpede, senior foreign exchange analyst at Refco in Chicago.

It probably puts more pressure on the Bank of England to cut rates, he said.

Revised data showed UK GDP rose only 0.1 per cent in the first quarter, lower than the 0.2 per cent previous estimate and average forecast by analysts.

The euro held slightly above a six-week low touched early in the session against the dollar and pushed higher against the yen for a third straight session.

The euro traded at $1.1433, up 0.11 per cent on the day and surged to 69.30 pence, a 0.83 per cent gain against sterling. The euro rose to 136.75 yen, up 0.32 per cent.

The dollar managed to hold a small advantage against the yen, trading at 119.61 yen, a gain of 0.20 per cent, but fell to 1.3493 Swiss francs, a loss of 0.16 per cent.

Early in the session, the greenback had reached two-month highs against both the yen and the franc, but it could not capitalize on the University of Michigan’s final sentiment report for June, which showed a reading of 89.7, according to market sources. Economists’ consensus expectations had been for a lower reading of 87.3.

The dollar’s trajectory had been moving higher since the Federal Reserve trimmed interest rates on Wednesday, with rising speculation the US easing cycle may be over and growth would pick up.

It’s a story of improving growth prospects, with (bond) yields starting to pick up. The bond market rally is coming to an end, and that is bearish for the euro and bullish for the dollar, said Steven Saywell, currency strategist at Citibank.

But some analysts are not inclined to see the dollar’s prospects as that rosy.

At least from a fundamental standpoint, it is unreasonable for the dollar to get too strong because the irony is, as the US economy recovers, the trade and current account deficit are going to get worse, cautioned Malpede.

The deficits show more cash being drained from the US economy to pay for imported products than coming in to purchase US goods and services, leading to slack demand for the dollar. —Reuters