NEWS / Foreign Exchange

RPT-FOREX-Dollar slips as US data triggers more selling

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By Amanda Cooper

NEW YORK, May 30 - The dollar tumbled on Tuesday, staging its largest one-day fall against the euro in six weeks after U.S. consumer confidence hit a three-month low in May, adding to the overall negative sentiment.

The decline in consumer confidence wiped out the dollar's brief gains after U.S. President George W. Bush nominated Goldman Sachs (GS.N: , , ) Chairman Henry Paulson to be Treasury secretary.

The dollar also fell prey to a sharp sell-off against other major European currencies and the yen, as traders returning from a long weekend in the United States leapt at the chance to sell into any moves higher.

"While there was some decent movement this morning, I don't think the underlying sentiment this morning has changed that much," said Ron Simpson, managing director of global currency analysis at Action Economics.

"The market is happier to sell dollars than buy them at this point but if you look at the underlying factors -- which are monetary policy, and economic growth and the so-called structural imbalances ... the market has gotten its arms around them pretty well," he said.

By 1:00 p.m. (1700 GMT) in New York, the euro <EUR=> was at $1.2882, up a percent from Monday's close in its largest one-day rally since mid-April.

The euro hit a session high of $1.2909 after the Conference Board reported its index of consumer confidence fell in May to a three-month low. However, the reading of 103.2, down from 109.8, topped expectations for a 101.1 reading. For details, see [ID:nN30425506].

Paulson's nomination ended weeks of speculation over who would replace incumbent Treasury Secretary John Snow.

The nomination was not initially viewed as likely to change the current tendency in Washington to allow the dollar to drift lower to help correct global imbalances.

Still, the thinking within the investment community suggests a Wall Street nominee may be more likely to reiterate the "strong dollar" mantra made popular by former Treasury chief Robert Rubin, who also joined the Treasury from Goldman Sachs.

But Ashraf Laidi, chief currency analyst at MG Financial Group said Paulson's nomination may only provide "temporary relief" to the sliding dollar.

"We doubt that Paulson's role at the Treasury in the next two-and-a-half years will alter the current and emerging fundamental challenges to the U.S. currency," Laidi said in a research note.

Indeed, against the yen <JPY=>, the dollar was down 0.4 percent at 111.97 yen, while sterling <GBP=> was up 1.3 percent at $1.8835 in its biggest one-day climb in 10 months.

Against the Swiss franc <CHF=>, the dollar was down 1.3 percent at 1.2092 francs, the largest one-day loss in six weeks.

Comments from Chicago Fed President Michael Moskow to CNBC television on Tuesday that U.S. inflation was at the upper end of his comfort zone also offered some support to the dollar.

However, the euro remained broadly supported by comments earlier in the session from European Central Bank Governing Council member Klaus Liebscher, who was quoted as saying there was a broad spectrum of risks to euro-zone price stability and that "strong vigilance" was needed.