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FX round-up: Dollar loses grip on earlier gains

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Date: Tuesday 08 Jul 2008

LONDON (ShareCast) - The dollar started the week on firm footing against major currencies Monday, as oil prices retreated and as sellers sat on their hands amid the meeting of the Group of Eight world leaders in Japan.

Traders are keeping a keen ear for comments from G8 about support for a stronger greenback.

However around lunch time the dollar started to lose momentum, sparked by more credit market woes in the shape of Lehman Brothers’ comments that mortgage financiers Fannie Mae and Freddie Mac could need tens of billions in extra capital.

The dollar also ran out of puff as equity markets turned lower amid fresh concern about the financial sector.

The euro felt the strain as expectations that the European Central Bank would increase interest rates again later in the year fade. Otherwise sterling came under pressure Monday after a fresh batch of weaker than expected manufacturing and industrial production. Sterling fell slightly against the dollar and the euro.

Monday’s economic data is the latest to show Britain’s economy is struggling with a clear slowdown in the country’s key banking, housing and retail sectors.

The data also puts pressure on the Bank of England, which is also grappling with inflation.

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