Dollar weakens on stimulus hopes

[Auburn85 438]

http://news.yahoo.com/s/afp/20090209/bs_af...XyY26PRZwrv5rEF

LONDON (AFP) – The dollar fell against the euro in European trading on Monday as the US currency lost some of its appeal as a refuge for investors due to hopes for a US economic rescue plan, dealers said.

In late London trade, the European single currency strengthened to 1.3066 dollars from 1.2943 dollars in New York late on Friday.

Against the Japanese currency, the dollar dropped to 91.39 yen from 91.83 yen on Friday.

The US Senate was close to voting on a revamped stimulus bill of more than 800 billion dollars (more than 600 billion euros) as President Barack Obama presses for swift action to revive the world's largest economy.

Economic turmoil in recent months strengthened the dollar as investors flocked to buy it, seeing it as a safer investment in uncertain times.

Obama's plan has raised prospects of an improvement in the economy, however, so investors feel emboldened to invest in other currencies -- though not all analysts were convinced on Monday.

"Basic qualms remain, such as whether it will be enough to boost the economy," said Mitsubishi UFJ Trust and Banking Corp's chief forex strategist Hideaki Inoue.

"If it emerges in the coming months that Obama's stimulus measures are having little effect, markets will be swamped again with renewed uncertainty."

There was also caution ahead of a speech on Tuesday -- one day later than initially planned -- by US Treasury Secretary Timothy Geithner on fresh measures to clean up the financial system.

Commerzbank economist Valentin Marinov said investors' morale was boosted by the prospects for Obama's and Geithner's plans, though he doubted the optimism would last.

The market was also digesting grim US data that underscored the economic challenges for Obama's administration.

The US government reported Friday that unemployment spiked to a 16-year high of 7.6 percent in January from 7.2 percent in December as nearly 600,000 jobs were lost.

Non-farm payrolls plunged by a larger-than-expected 598,000 in January, the biggest drop since late 1974. That brought the total number of jobless people to 3.6 million since the US recession began in December 2007.

In late London trade on Monday, the euro changed hands at 1.3066 dollars against 1.2943 dollars late Friday, at 119.41 yen (118.87), 0.8748 pounds (0.8748 also on Friday) and 1.5027 Swiss francs (1.5028).

The dollar stood at 91.39 yen (91.83) and 1.1570 Swiss francs (1.1615).

The pound was at 1.4937 dollars (1.4789).

On the London Bullion Market, the price of gold fell to 895 dollars an ounce from 913 dollars late on Friday.

don't expect gold to stay down long, especially when the stimulus passes.