Dollar
dips, trade thins on May Day after stormy week
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[May 01, 2015]
By Patrick Graham
LONDON (Reuters) - A holiday in most of
Europe on Friday thinned trade after a tumultuous week which has seen
the dollar collapse in value, bond yields soar and stock markets in
Europe and the United States weaken.
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The action, driven on by shockingly poor U.S. first quarter growth
numbers on Wednesday, sent the dollar down 6 percent in just over a
week, Bund yields racked up the biggest two-day jump since the
depths of the euro zone crisis in 2011, and European stock markets
have fallen for four days in a row.
All major European markets except London, its biggest, were closed
on Friday, but the euro was up another 0.3 percent to a two-month
high of $1.1270.
"Weak U.S. data, a bounce in oil prices and a pick-up in European
growth ... all weighed on positioning and the fallout has been seen
in higher Bund yields, a stronger euro, a weaker U.S. dollar and a
bounce in the commodity-currency bloc," Societe Generale analysts
wrote in a note to clients.
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"Now we are back to waiting to see if the U.S. economic slowdown
will reverse in the coming months."
Underpinning the volatility are concerns that the world's economies,
rather than recovering from a period of weakness which dates back to
the 2008 financial crash, are slipping.
Asian shares recovered from session lows but struggled overnight on
the back of weak U.S. corporate earnings. London's FTSE 100 dipped
about 0.4 percent in the first hour of trade, with some analysts
pointing to a Chinese Purchasing Managers' Index (PMI) for April
that showed its manufacturing sector barely grew.
The reading of 50.1 was barely above the 50-point mark that
separates growth from contraction, but was slightly better than a
consensus expectation for a reading of 50, as activity in the
world's second-largest economy continues to cool.
There were better signs from U.S. unemployment data on Thursday and
the main focus on Friday will be the ISM survey of U.S.
manufacturing sentiment survey later in the day.
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"While it is true Thursday's data was good, we need a steady stream
of good data for the dollar bull trend to be restored," ING FX
strategist, Petr Krpata, said.
"Right now there is a fair bit of doubt about the dollar's bull run
and whether the euro will drop further. We think the euro will
resume its decline."
Crude oil prices were a touch lower after logging their best monthly
gains in six years in April, helped by the dollar's weakening and
bets that a supply glut would ease.
Brent crude stood at $66.47 a barrel, after reaching a 2015 peak of
$66.93 and adding 21 percent in April. U.S. crude fell 0.2 percent
to $59.50, after hitting a 2015 high of $59.85 in post-settlement
trading.
(Additional reporting by Judy Hua and Pete Sweeney in Beijing, Lisa
Twaronite in Tokyo; Editing by Louise Ireland)
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