After hitting a new record high at 1.4120 versus the dollar, the euro edged lower versus the dollar on weaker-than-expected manufacturing and services PMI reports from the euro zone.
The Euro zone services PMI fell from 58 to 54 in September, below the estimate of 57.5. The manufacturing PMI dropped from 54.3 to 53.2, weaker than the expectation of 53.9. Euro zone current account balance shrank from 11.4 billion euros to 3.3 billion euros in July. The main reason behind the weak figures is the recent global financial market turbulence beginning from August.
The dollar remains under pressure after the Fed cut half a percentage-point this Tuesday. Fed Chairman Ben Bernanke yesterday said credit market turmoil may make the housing recession more severe, adding to the worries over the nation’s economy. Interest-rate futures indicated traders bet a 70 percent chance of a quarter-percentage point cut to 4.50% at the Fed’s policy meeting on October 31.
The Fed’s aggressive move lifted investors risk appetite and carry trades increased modestly. That is why the dollar weakened against most of its rivals except the yen after the rate cut.
Besides, the sterling has been recovering from subprime crisis concern sparked by the Bank of England bailing out the nation’s fourth biggest home mortgage lender Northern Rock. The currency on Friday strengthened to around 2.02 versus the dollar.
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