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LONDON : The dollar wilted against the euro in the face of renewed concern over the huge US current account deficit and ahead of a closely-watched jobs report to be published in the United States.
The single European currency in late-day trade was at 1.3267 dollars from 1.3243 late Friday in New York.
The dollar was meanwhile trading at 104.25 yen against 105.19 on Friday.
Analysts said there was a risk the dollar could suffer a new bout of selling over deficit concerns and worries that Asian central banks in particular will diversify assets away from the US currency.
"The dollar has failed to make any recovery as the market is still concerned about the financing of the US current account deficit and last week's story of reserve diversification still hanging over the market," said Neil Mackinnon, chief economist at ECU Group.
Until the turn of the year the dollar was weighed down by the gaping US budget and current account deficits, which some economists fear could erode foreign investment in the United States, thereby driving the currency down still further and forcing the US central bank to raise interest rates.
In the first few weeks of 2005 the dollar managed to stabilize and settled in a tight trading range above the multi-year lows it experienced against its peers.
Now, said Mackinnon, "on all fronts the dollar is looking shaky and is at a real risk of a fresh down-leg."
The reaction to this Friday's US jobs report will be critical for the dollar's short-term prospects, analysts said.
Although the figures are expected to show that the US economy is generating solid job growth, some analysts argue that the dollar is unlikely to reap any benefit as the US economic outperformance threatens to fuel imports and exacerbate current account concerns.
"From the perspective of relative growth, the dollar seems to be in a no-win situation," said Morgan Stanley currency strategist Stephen Jen.
"If the US grows a lot faster or a lot slower than the rest of the world, the dollar could suffer, unless the Fed steps in and tightens substantially to support domestic savings," he added.
Others are more optimistic that the traditional link between the economic data and the currency will be re-established.
"The potential for a strong report remains high given the strength already observed in higher frequency employment data," said Steve Pearson, chief currency strategist at HBOS.
"Hence, the dollar weakness currently observed should begin to fade in the first half of the week, with a potential for a strong dollar recovery in the second half," he added.
Elsewhere the yen remained firm after a raft of Japanese economic data overnight boosted hopes that the world's second largest economy is growing steadily.
Those hopes were encouraged by news that industrial production in January rose by 2.1 percent from the previous month, way above forecasts for an 0.8 percent rise and December's 0.8 percent fall.
There was further good news on the retail sales front, with sales up 2.2 percent in January on a year-on-year basis.
The euro was changing hands at 1.3267 dollars against 1.3243 late on Friday in New York, 138.43 yen (139.37), 0.6894 pounds (0.6898) and 1.5375 Swiss francs (1.5384).
The dollar stood at 104.25 yen (105.19) and 1.1588 Swiss francs (1.1612).
The pound was at 1.9247 dollars (1.9193), 200.65 yen (201.91) and 2.2304 Swiss francs (2.2288).
On the London Bullion Market, the price of an ounce of gold stood at 435.45
dollars against 434.25 dollars late on Friday.
- AFP
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