Dollar Gains On Euro, Slumps Versus Yen

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The dollar was generally stronger on Friday, gaining ground on higher-yielding currencies after dismal personal spending data hinted that recent economic growth was a product of government spending rather than the once-dependable US consumer.

Stocks tumbled, fueling increased risk aversion, which helps the safe haven dollar against its riskier counterparts. However, the dollar hit the skids versus the yen as traders favored the Japanese currency as a safer play.

While Reuters and the University of Michigan released a report on Friday showing an upward revision to their reading on consumer sentiment in the month of October, the index still came in below the final reading from September.

In other economic news from the US, activity in the Chicago-area manufacturing sector unexpectedly expanded in the month of October, according to a report released by the Institute for Supply Management - Chicago on Friday, with the index of activity in the sector rising to its highest level in over a year.

The dollar improved to 1.4720 versus the euro, staying away from a 14-month low of 1.5059 set earlier this week. With stocks in correction mode and concerns about the sustainability of economic growth emerging, the dollar could move higher versus the euro next week.

Likewise, the buck moved higher versus the loonie, hitting a 3-week high of C$1.0837 before leveling off. The has been topsy turvy this week, with the loonie moving along with the price of oil.

Crude turned sharply lower again today, slipping toward $78 on demand concerns.

The dollar also firmed up against the sterling, rising to 1.6428. The pair has been unable to sustain any direction over the past few months, with traders unsure about the health of the UK economy.

The yen was the most fashionable currency today. The dollar slipped below 90 for the first time in two weeks, dropping back toward multi-month lows near 88.

The Bank of Japan announced its decision to maintain its key interest rate and to end the purchase of commercial paper and corporate bonds at the end of 2009 as scheduled, as it becomes necessary to conform to the changes in financial markets.

The Policy Board, led by Governor Masaaki Shirakawa, unanimously decided to leave the uncollateralized overnight call rate unchanged at 0.1% as expected.

The dollar was generally stronger on Friday, gaining ground on higher-yielding currencies after dismal personal spending data hinted that recent economic growth was a product of government spending rather than the once-dependable US consumer. (Market News Provided by RTTNews)