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Dollar drops in light Christmas Eve trade

LONDON - The dollar dropped against the euro in quiet pre-Christmas deals on Wednesday, weighed down by data indicating persistent weakness in the US economy, analysts said.

In late morning trading, the European single currency rose to 1.3991 dollars, from 1.3924 dollars in New York late on Tuesday.

Against the Japanese unit, the greenback eased to 90.31 yen, from 90.96 yen.

Currencies moved in a narrow range as many market players were absent ahead of the Christmas Day holiday on Thursday in the United States and Europe when markets will be closed.

“We’re certainly looking at unsettled market conditions as we move into the quiet Christmas period,” said CMC Markets analyst James Hughes.

Many traders were downbeat about prospects for 2009, when some economists forecast that the global economy will decline for the first time in decades.

“Uncertainty remains on the markets going into the new year. Investors are adjusting their positions as they are wary of risks that markets will turn negative,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corporation.

US government data released on Tuesday left unrevised a previous estimate of 0.5-percent negative growth for the third quarter, a figure seen as marking the start of a steep downturn for the world’s biggest economy.

Separate reports showed declines in new and existing home sales.

New home sales slipped 2.9 percent in the past month and fell 35.3 percent from a year earlier to the lowest level since January 1991.

Sales of existing US homes slumped a further 8.6 percent, according to the National Association of Realtors.

The euro got a boost after European Central Bank (ECB) chief Jean-Claude Trichet left the door open for more measures—other than monetary loosening—to fight deflation and shore up the economy, dealers said.

The Japanese central bank cut rates last Friday to a benchmark 0.1 percent and unveiled measures to help ailing credit markets by agreeing to buy commercial paper, debt issued by companies to run their daily operations.

China followed on Monday, lowering its rate by 0.27 percentage points to 2.25 percent, the lowest level since February 2004, but markets were disappointed by the smaller-than-expected cut.

In trading in London on Wednesday, the euro changed hands at 1.3991 dollars against 1.3924 dollars late on Tuesday, at 126.22 yen (126.67), 0.9480 pounds (0.9444) and 1.5101 Swiss francs (1.5161).

The dollar stood at 90.31 yen (90.96) and 1.0802 Swiss francs (1.0887).

The pound was at 1.4747 dollars (1.4729).

On the London Bullion Market, the price of gold eased to 840.95 dollars an ounce from 843.50 dollars late on Tuesday.