December 02, 2007	Sunday	Ziqa’ad 21, 1428

NEW YORK, Dec 1: The dollar firmed on Friday amid renewed optimism about the outlook for the US economy as prospects for a cut in interest rates appeared to rise. The euro was quoted at $1.4632 at 2200 GMT after 1.4742 late Thursday in New York.

The dollar was meanwhile trading at 111.21 yen, up from 109.88 on Thursday.

The week’s gains in equity prices helped boost the greenback, as did the publication of an index measuring manufacturing activity in the Chicago area.

The index in November rose to 52.9 points from 49.7 in October, with analysts having expected a reading of 50.5.

The index offset a lackluster report on US personal income and spending which showed both rising 0.2 per cent in October, below most forecasts.

The markets focused on prospects for a cut in US rates after Federal Reserve chairman Ben Bernanke said Americans are facing “headwinds” that could hurt the economy.

Yet many traders viewed the comments as hinting at a cut in rates that would keep the world’s biggest economy growing.

Lower rates would typically make dollar denominated assets less attractive, reducing demand for the currency and until recently this was one of the main ingredients of the weaker dollar, said Patricia Lifson at PNC Bank.

David Rodriguez at Forex Capital Markets said some of the dollar’s strength came from multinational companies buying greenbacks to square positions for the end of the month or fiscal year.

The price action “suggests that renewed euro and British Pound selling pressures are merely a function of month-end and year-end position squaring -- hardly an endorsement for further greenback gains, he said.

Indeed, the day’s economic developments only further dimmed the outlook for the future of dollar performance. In late New York trade, the dollar stood at 1.1318 Swiss francs from 1.1179.

The pound was at $2.0565 from 2.0610.---AFP