LONDON, Oct 25: The dollar edged lower against the euro on Thursday as the market digested another set of figures showing the US housing market remained mired in the doldrums, dealers said.
Combined with Wednesday’s sharper-than-expected drop in US sales of existing homes, Thursday’s new-home sales were down 23 per cent from a year earlier and did very little to reassure the markets, they said.
The latest data added to the near-universal view that the Federal Reserve will cut US interest rates again next week in an effort to bolster the economy.
That perspective can provide some support for the currency on the calculation that a stronger economy will ensure the dollar remains an attractive investment proposition. But there is also the danger that lower returns could really knock sentiment in the currency.
The euro firmed to $1.4300 in late trade on Thursday, up from $1.4268 in early deals and $1.4264 in New York late on Wednesday. It hit a high during the day of 1.4344, just short of its record 1.4347.
“The Fed hardly needs any further excuses to cut interest rates next week but Thursday’s housing data should seal the case for a 25 basis points rate cut,” said Calyon analyst Mitul Kotecha.
“Housing data over recent weeks has been truly awful, with most releases falling below market expectations.” Other weak US data added to the negative tone. New orders for durable goods fell 1.7 per cent in September, compared with forecasts for a 1.5 per cent gain.
“With the market expecting an upward bounce to durable goods ... the negative surprise is contributing to the ... dollar pessimism that is likely to push the greenback to fresh record lows against the majors,” said Michael Woolfolk, currency strategist at Bank of New York.
“The dollar drops across the board as the case for further Fed easing becomes more of a macroeconomic argument and not just owing to market volatility,” said Ashraf Laidi, chief currency analyst at CMC Markets.
The Fed slashed rates last month by a hefty 50 basis points, its first cut in more than four years, causing investors to dump the dollar, which fell to record lows against major currencies, including the euro.
The euro’s gains may have been muted by weaker news from Germany -- the biggest economy in the 13-nation eurozone -- where business confidence slipped for a sixth month in October.
In European trade Thursday, the euro was at 163.35 yen, up from 162.97, at 0.6979 pounds after 0.6959 and at 1.6702 Swiss francs, down from 1.6717 on late Wednesday.
The dollar stood at 114.26 yen, little changed from 114.24, and at 1.1683 Swiss francs, down from 1.1716.
The pound was at $2.0492 after 2.0493.—AFP