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Dollar Slightly Down On Higher Crude, Curbed By Data Ahead

      By Riva Froymovich      Of DOW JONES NEWSWIRES    

NEW YORK (Dow Jones)--The dollar is little changed against its major rivals early Monday in New York as the market holds tight ahead of key data releases later this week, but is facing some headwinds from higher crude oil futures.

Crude oil futures rose over $1 a barrel in London Monday after Royal Dutch Shell PLC (RDSA) confirmed some of its production had been disrupted in Nigeria. After a large fall in oil prices last week, which buoyed the dollar against the euro and yen along with a rise in U.S. stocks, the reversal is leading to some profit-taking.

"The dollar has softened a bit versus the majors since the European open but thus far, the broadly firmer bias that has developed over the past two weeks remains in place," said Robert Lynch, a currency strategist HSBC in New York.

"Oil remains a key wild card in the current environment, particularly as the shorter term forecasts of even the most well regarded energy analysts seem less reliable," he said. "(There) is no question that movements there continue to exert influence on dollar sentiment and direction."

Lower oil prices boost U.S. economic sentiment and interest in buying dollars. They are also seen as a comfort to European Central Bank concerns on inflation, which leads to lowered expectations for further central bank tightening there - a major source of euro support.

Lynch adds: "While there is certainly some logic in such assumptions, it is important to recognize that the ECB is not basing policy decisions on two-week or even two-month gyrations in oil prices."

Early Monday in New York, the euro was at $1.5755 from $1.5700 late Friday. The dollar was at Y107.62 from Y107.89, while the euro was at Y169.55 from Y169.40, according to EBS. The U.K. pound was at $1.9889 from $1.9910, and the dollar was at CHF1.0333 from CHF1.0369 late Friday.

Major data releases expected later this week in the U.S. include gross domestic product and nonfarm payrolls. Key inflation and employment reports will be out in Europe as well.

The passage Saturday of housing legislation by U.S. Senate, hoping to send a calming message to financial markets, is having little influence on foreign exchange movement early Monday. Analysts say the approval was expected and any positive lift the bill could provide has already been priced into the dollar.

Meanwhile, the euro's advances are likely limited by disappointing data.

German market research group GfK's forward-looking consumer climate index plunged to 2.1 points for August, from a downwardly revised 3.6 points in July, hitting its lowest levels since June 2003.

The data report is a clear sign that inflationary pressure is taking its toll on households' spending, and is contributing to a worsening of the economic outlook in Europe's largest economy, economists say.

The dismal outlook for the largest economy in Europe could be a boon for the greenback.

"(An) outright contraction in the euro-zone economy seems increasingly likely before the U.S. economy contracts," say analysts at Brown Brothers Harriman in New York.

Elsewhere, the U.K. pound declined after Hometrack reported U.K. house prices fell for the 10th straight month in July. The annual drop in prices was the deepest since the Hometrack survey began in 2001.

In Rio de Janeiro, the Brazilian real opened stronger against the U.S. dollar Monday, surging to a fresh nine-year high against the greenback as a recent interest rate hike continued to attract heavy inflows. The dollar was at BRL1.5710 in trading on the Brazilian Mercantile and Futures Exchange, or BM&F, stronger from Friday's close at BRL1.5730. .

-By Riva Froymovich, Dow Jones Newswires; 201 938-5063; This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

(Emese Bartha in Frankfurt and Sun Yu in New York contributed to this report.)

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(END) Dow Jones Newswires

July 28, 2008 09:00 ET (13:00 GMT)


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