LONDON, 6 December 2007 — The dollar was firmer against the euro yesterday, bolstered by strong US data as the market waited for interest rate decisions today in Britain and the euro zone, dealers said.
They said robust US factory order figures for October along with a survey pointing to an unexpectedly sharp increase in employment in November tested the view that US Federal Reserve will cut rates sharply when it meets next week.
“The unexpectedly strong employment survey, which shows a robust 189,000 increase in private payrolls in November, will raise market expectations for the official non-farm figures (due Friday),” said Paul Ashworth at Capital Economics.
They will also “deal a blow, at least temporarily,” to growing hopes that the Fed could opt for a bigger 50 basis points interest rate cut, rather than the expected 25 points, Ashworth said.
In late European trade, the euro was at 1.4665 dollars, down from 1.4739 in early deals and 1.4764 late Tuesday in New York. Dealers said all attention was now turned to meetings of the Bank of England and the European Central Bank Thursday.
While earlier in the week both were widely expected to hold their key interest rates at 5.75 percent and 4.00 percent respectively, a series of poor British data prompted some speculation of a British cut in lending costs.
As a result, the pound came under pressure, especially against the dollar and euro.
Meanwhile, Australia’s central bank left interest rates on hold at an 11-year high of 6.75 percent yesterday, while warning that it remained concerned about inflationary pressures.
In late European trade, the euro changed hands at 162.60 yen compared with 162.01 late Tuesday, at 0.7229 pounds (0.7170) and 1.6499 Swiss francs (1.6481). The dollar stood at 110.88 yen (109.71) and at 1.1252 Swiss francs (1.1161).
In London, the price of gold fell to $793 an ounce, falling back through the key $800 level and down from $797.50 late on Tuesday.
Meanwhile, Europe’s main equity markets closed sharply higher yesterday in a global rally that saw big gains in Asia and in the United States.
At the close, London’s FTSE 100 index was up 2.83 percent at 6,493.80 points, in Paris the CAC 40 added 2.02 percent to 5,659.07 points and in Frankfurt the DAX rose 1.74 percent to 7,944.77 points. The DJ Euro Stoxx 50 index of top euro zone shares rose by 1.63 percent to 4,410.00 points.
The Dow Jones Industrial Average was up 1.08 percent at 13,392.04 at 1605 GMT. The NASDAQ composite jumped 1.53 percent to 2,659.92 while the Standard and Poor’s 500 broad-market index rose 1.12 percent to 1,479.18.