Dollar hit by US housing troubles

AFP - Nov 2, 2007

The dollar fell against the euro on Friday as continuing uncertainty over the US subprime housing sector weighed on the US currency, dealers said.

In early European trade, the European single currency rose to 1.4482 dollars from 1.4422 dollars in New York late on Thursday.

Investors are worried over banks' exposure to the United States' high-risk mortgage sector, which is facing severe problems after they lent cash to borrowers with patchy credit histories.

Such concerns have helped undo much of the optimism generated by Wednesday's quarter point cut in US interest rates to 4.50 percent, with dealers saying the market has slipped back into worry mode about the US economic outlook.

"The optimism expressed by the (US central bank) in its statement on Wednesday that 'strains in financial markets have eased somewhat on balance' is up for debate after the sudden upturn in risk aversion on fears that large financial institutions have not revealed the true scale of losses relating to the sub-prime mortgage fallout," said economist Derek Halpenny at The Bank of Tokyo-Mitsubishi in London.

The market will get a better picture of the health of the world's largest economy later Friday with the release a key monthly US labour market report that Wall Street expects to show 80,000 new jobs were created in October.

US data released overnight was patchy. A government report showed that US consumer spending rose a softer-than-expected 0.3 percent in September as a persistent housing downturn and tighter credit squeezed households.

The report also showed that personal income rose 0.4 percent, matching most analysts' forecasts.

A separate snapshot on home foreclosures by private firm RealtyTrac showed banks and mortgage firms filed notices against 446,726 homes during the third quarter, almost double the number lodged a year earlier.

The US property market has been in a slump since early 2006 and foreclosures have surged in the past year as hundreds of thousands of Americans have struggled to pay their mortgages.

In European trade on Friday, the euro changed hands at 1.4482 dollars, against 1.4422 dollars late Thursday, at 166.12 yen (165.18), 0.6950 pounds (0.6935) and 1.6701 Swiss francs (1.6699).

The dollar stood at 114.72 yen (114.54) and 1.1535 Swiss francs (1.1575).

The pound was at 2.0835 dollars (2.0793).

In London, the price of gold rose to 790.93 dollars per ounce at the morning fixing from 790.25 dollars late on Thursday.