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Dollar falls on durable goods data

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January 27, 2001 

NEW YORK (AP) — The dollar fell slightly against most major foreign currencies except in quiet trading Friday after an economic report provided further evidence of the weakness in the U.S. manufacturing sector.

Commerce Department reported that against most analysts' predictions, orders for all durable goods — items expected to last at least three years — rose by 2.2 percent last month, up from a 1.8 percent rise in November. But excluding a 14.6 percent jump in orders for airplanes and other transportation products, orders and shipments were down.

``It's a good indicator of the health in the U.S. manufacturing sector and a parameter of consumer confidence,'' said Andrew Delano, foreign exchange analysts at IDEAglobal. ``Friday's figures point to the risk of more economic weakness in the U.S. It's becoming more apparent in the data and it will take some action from the U.S. policy sector to keep the (economic) soft landing intact.''

The report, however, has little impact on foreign currency rates Friday as traders are awaiting for the Federal Reserve's Open Market Committee scheduled on Jan 30, 31 to discuss U.S. interest rates.

The euro rose slightly against the dollar and finished the session at 92.40 cents in late New York trading, slightly up from 92.37 cents late Thursday.

Currency traders said the dollar should avoid a huge selloff because currency markets have already priced in a fairly pessimist view of the U.S. economy.

``That's why the euro is having difficulties staging the type of rally we saw last December,'' Delano said. ``There's no question the European economy is outperforming the U.S. economy, but investors are not convinced that Europe is going to be a haven for them as the U.S. has been in the past.''

Currency traders are now looking ahead to the release of the Conference Board monthly survey on consumer confidence on Tuesday, and the Commerce Department's report on gross domestic product for fourth quarter scheduled on Wednesday.

Foreign money markets will also follow closely the Fed's meeting in Washington, although a 25- to 50-basis-point cut in U.S. interest rates has already been factored in the market.

In other trading, the yen fell against the dollar Friday on weak data out of Japan.

``The weaker-than-expected retail sales and Consumer Price Index do not reflect a very healthy corporate outlook in Japan,'' Delano said. ``There's still a bias for a softer yen.''

The yen was also hurt by a fall on the Tokyo Stock Exchange. The Nikkei index ended the session down 5.95 points, or 0.46 percent, at 1,294.44.

In late New York trading, the dollar also was quoted at 117.25 Japanese yen, up from 116.77 yen.

The yen has been steadily falling on fears that the Japanese economic recovery may be stalling.

In other trading, the dollar also was quoted at 1.6512 Swiss francs, down from 1.6519, and 1.5050 Canadian dollars, down from 1.5071. The British pound fell to $1.4618 from $1.4620.

Currencies of the 12 countries participating in the euro are no longer traded separately and are tied to the euro by a fixed rate. Based on Friday's euro rate, the dollar was worth 2.1157 German marks, up-down from 2.1175; 7.0956 French francs, down from 7.1018; and 2,094.51 Italian lire, down from 2,096.32. ``The fact that we have done this shows up the lack of modernity in a party which imagines it knows more about the economy than the Social Democrats,'' he said at a party meeting later Friday.

On Friday, Merkel charged the plan was full of ``trickery and deception.'' Her party says the government's figures are fake and hide deeper cuts, and that the private savings plan disadvantages families.

Pushed by Schroeder as a touchstone of German economic modernization, the reform was repeatedly amended to quiet complaints by labor unions, which are close to the Social Democrats.

Schroeder agreed with unions last month to keep pensions for new retirees to a minimum 67 percent of their last net income by 2030. That is a slight reduction from the current 69 percent — and less of a cut than the 64 percent benefit originally laid out by Riester.

Passage in the lower house came Friday on the strength of the government's majority. The opposition-held upper house takes up the bill next month.

The government wants to offer tax breaks and cash incentives to promote voluntary private savings, designed to compensate for planned cuts to the state pension system.

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