Currencies: Dollar slips as Russia raises euro purchases

Reuters, August 02, 2005

NEW YORK -- The dollar trimmed its losses on Monday after stronger-
than-expected data on U.S. manufacturing and options-related trading
partially offset central bank demand for euros in a thin market. 

The U.S. Institute for Supply Management's manufacturing index rose
to 56.6 in July, the highest this year, from 53.8 in June and above
economists' forecast rise to 54.5. 
The dollar initially slipped on the report, with underlying demand
for euros from central banks and position adjustments in a
relatively thin summer market pushing it lower. But a wave of euro
selling after a barrier was taken out at $1.2250 allowed the dollar
to pare losses. 

"The minute we hit it that was it, and we went right back below
$1.2200 again," said Grant Wilson, senior dealer at Mellon Bank in
Pittsburgh. 

In late trading, the euro rose to $1.2206 from $1.2127 late Friday.
The dollar slipped to ¥112.070 from ¥122.415 and fell to 1.2773
Swiss francs from 1.2885 francs. The pound was at $1.7704, up from
$1.7579. 

Aziz McMahon, currency strategist at ABN AMRO, said that underlying
demand for euros from central banks could be weighing on the
dollar. 

"I think it's probably just a case of structural factors weighing on
the dollar again," he said.  

The Russian central bank said Monday that it had increased the euro
share of its target currency basket to 35 cents from 30 cents, and
had reduced its dollar share to 65 cents from 70 cents. Traders have
frequently cited Russia as a buyer of euros in recent weeks and
months. 
 
The euro pushed through $1.22 after news that the euro-zone
manufacturing sector recorded growth last month for the first time
since March.
 

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