March 26, 2006	Sunday	Safar 25, 1427

NEW YORK, March 25: The dollar traded mostly lower on Friday after a report showing a steep decline in new US home sales prompted traders to rethink their outlook for future rate hikes by the Federal Reserve.

The euro rose to $1.2037 from 1.1996 late Thursday in New York.

The dollar was meanwhile trading at 117.42 yen against 117.88 on Thursday.

The fall in new home sales was unexpected, particularly after Thursday’s strong data on sales of existing homes.

Sales of new homes fell by 10.5 per cent to 1.080 million units in February, official figures showed, well below market expectations for a decrease to about 1.21 million. It was the largest percentage decrease in almost nine years.

The data should put some caution into the speculation about the Fed’s rate hike policy, said Mike Malpede, senior currency analyst at Man Global Research. The prospect of higher US rates has been underpinning the greenback in recent months.

Malpede said a report Thursday that showed surprising strength in existing home sales “was a one-off report.

Some said the latest report on housing could be even more worrisome for the economy.

Bubbles burst, they really do, said Joel Naroff of Naroff Economic Advisors.

Naroff added that the Fed “has to be concerned that (a collapse) just may happen, which could make them more cautious going forward.

Attention will now turn to Tuesday’s rate decision by the policymakers on the Federal Reserve Open Market Committee.

The FOMC is fully expected to raise rates by another quarter point to 4.75 per cent, and all attention will center on the accompanying statement for hints as to the likelihood of further monetary tightening.

Next week’s FOMC meeting and the all-important accompanying statement now take center stage” said Michael Woolfolk at the Bank of New York.

In late New York trade, the dollar stood at 1.3104 Swiss francs after 1.3171 Thursday.

The pound was being traded at $1.7424 following 1.7340 on Thursday.—AFP