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Dollar retreats amid renewed G7 worries
(Updates prices, adds comment) NEW YORK, Feb 4 (Reuters) - The dollar reversed gains against other major currencies on Wednesday, as traders grew apprehensive about implications for the dollar of a Group of Seven industrial nations finance ministers meeting this week. Stronger-than-expected U.S. economic data gave the dollar a brief early lift but markets refocused on the uncertainties for the dollar surrounding the upcoming G7 gathering in Florida. "Traders are marking time ahead of the G7 finance ministers meeting on Friday. I think there is still a significant amount of event risk and that is tending to temper the dollar's movement," said Alex Beuzelin, senior foreign exchange analyst at Ruesch International in Washington DC. "No one wants to put on any extended position," he added. By midday in New York, the euro rose against the dollar to $1.2542 (EUR=), after hitting an intra-day low of $1.2492 shortly after the release of the U.S. data. The dollar fell against the Swiss franc to 1.2499 francs (CHF=). The pound came off lows to $1.8352 (GBP=), down around 0.1 percent on the day. Against the yen, the dollar dropped marginally to 105.43 yen (JPY=), not far off a three-year low around 105.20 yen hit on Tuesday. FOCUS STILL ON G7 The market's focus is still on the Group of Seven finance minister's meeting in Boca Raton, Florida, on Feb. 6-7. Analysts broadly expect G7 ministers not to vary the tenor of their reference to currencies significantly from the wording of a communique released after they last met in September. "Wording is expected to be very vague, so it won't be a guidance to the market, and what we have to look at is how Asian central banks will react after G7," said Hans Redeker, chief foreign exchange strategist at BNP Paribas in London. But Ruesch's Beuzelin said markets were uncertain as to whether the G7 would issue a firmer statement against rapid currency rate movement and excess volatility than they did in Dubai in September. "Traders are waiting to see what happens and they are just content to range trade," he added. U.S. Treasury Secretary John Snow is due to testify on the 2005 budget before the House Budget Committee at 2:00 p.m. EST (1900 GMT). His testimony to a Senate committee on Tuesday was postponed after ricin poison was found in a Senate building. Caution is also looming ahead of a key U.S. jobs report on Friday. Non-farm payrolls, forecast to rise 150,000 in January compared with just 1,000 in the previous month, are closely eyed as an improving labor market could hold the key to the timing of a rate hike in the United States. Strong U.S. economic data earlier boosted the dollar, but gains were offset by worries about the labor sector. The employment index component of the U.S. Institute for Supply Management non-manufacturing survey slipped to 53.4 in January from 54 in December. The overall ISM index rose to 65.7 from 58 in August. Market expectations were for a reading of 60. "The data were essentially good for the U.S. dollar. But we had good numbers from the euro zone earlier, so net-net, there would probably be not too much benefit for the dollar," said Shaun Osborne, chief currency strategist at Scotia Capital in Toronto. "Gains were also tempered by the slightly weaker employment number," he said. But the upbeat U.S. data was balanced by equally robust numbers out of the euro zone, limiting the dollar's gains. The Reuters Eurozone Business Activity Index rose to 57.3 from 56.6 in December, adding evidence that activity in the region's services sector picked up speed, although it remained below a three-year high of 57.5 in November. (Additional reporting by Mariko Hayashibara in London) Back to Original Article: Mortgage News You Can Use
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