Monday, June 02, 2008

Dollar Back Above Par Versus Loonie, Mixed Versus Other Majors, Monday, June 02, 2008 2:35:50 PM

The dollar was mixed against other major currencies on Monday in New York as an Institute for Supply Management report showed that U.S. factory activity contracted in May for the fourth consecutive month.

The buck jumped back above par versus the loonie and firmed up on the sterling while hitting the skids against the broadly stronger yen.

Monday morning, the ISM said its index of activity in the manufacturing sector rose to 49.6 in May from 48.6 in April, although a reading below 50 indicates a contraction in the sector. Economists had been expecting the index to edge down to about 48.5.

The unexpected increase by the index was partly due to a rebound in production, with the production index jumping to 51.2 in May from 49.1 in April. The increase lifted the production index above the key 50 level.

The buck rallied back above parity versus the loonie for the first time since May 15, rising about a cent to 1.003. The dollar`s advance was fueled by data showing that Canadian consumer confidence fell to its lowest point since 2001. The board said its consumer confidence index dropped seven points to 85.8 in May.

The dollar also gained on the sterling, hitting a nearly 2-week high of 1.9595 in very early dealing before leveling of to trade at 1.9650 by mid-day.

The number of mortgage approved for house purchases in the UK stood at 58,000 in April, the Bank of England reported Monday. Mortgage approvals fell from March`s 63,000 and 65,000 expected by economists. Net lending secured on dwelling rose GBP6.4 billion compared with GBP6.7 billion in the prior month.

The dollar fell sharply versus the yen on Monday, dropping to 104 from 105 as risk aversion caused traders to flock to the lower-yielding Japanese currency. With the loss, the buck moved further away from last Thursday`s 3-month high near 106.

The buck was little changes in choppy dealing against the euro on Monday, bouncing back and forth between 1.55 and 1.56 for most of the day.

The Royal Bank of Scotland and NTC Economics revealed that Eurozone`s PMI for manufacturing sector fell to 50.6 in May from 50.7 in April -- its lowest level since 2005. However, the reading stood above the flash reading of 50.5.


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