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Author`s name Michael Simpson

US Economic Statistics Favors Euro

Investors disappointed about the Chicago business activity index
As it turns out, people are inclined to believe any analytical information which confirms their suspicions directly or indirectly. It seemed rather dubious that reviving of the US economy may be just in the minds of economy researchers, however the recently published information concerning the USA turned out to be positive. However, as we see now, people were waiting for more. As a result, the euro is advancing on the dollar everywhere. More and more information appears proving that something has rotted through in the US Empire.  

During the Monday trades the dollar exceeded the level of $1.14 per euro to stay on the level for a very short period and soon lost the position. First of all, traders profited by the euro weakening and started buying the European currency actively. Second, an annual report of the Bank for International Settlements in Basel published after the annual meeting of central bank presidents from different countries of the world called the US economy's prospects into question. According to the report, "there are reasons to believe that now the number of risks to US's economic growth is bigger as compared with the 1980s", K2Kapital informs. As a result, considerable correction of the dollar for reduction has been registered. At NY trades the day before yesterday the dollar traded for $1.151 per one euro vs. the previous level of $1.1424.

At 10:00 a.m. yesterday the Chicago department of the Institute for Supply Management reported that the Chicago business activity index made up 52.5 in June which was a bit higher as compared with May. Economists and investors expected that the increase would be bigger, that is why they were highly disappointed which in its turn exerted strong pressure upon the dollar. Investors supposed that the US manufacturing activity index calculated by the Institute for Supply Management may be lower than expected as well. New information on the US labor market is to be published this Thursday which may clarify the situation. At least, the markets expect that it will be so.

At the morning trades in Sydney, the dollar dropped with respect to the euro, the yen and even the Australian dollar. The dollar rate increased only with respect to the English pound and the Swiss franc. The rates of the basic currencies made up 119.43 yen per dollar and $1.1 per euro as of 10:40 a.m. in Sydney yesterday. Russia's news agency RIA Oreanda reports, analysts expect that the European currency will go up to the level of $1.160-70 per euro during the day.

Euro supporters are as optimistic as never before. The European Central Bank is confident of the Eurozone economic potential; they say that the basic rate won't reduce until September. As expected, this will be a new spur for the euro.

Russian analysts agree that in the nearest time the dollar rate dynamics will depend upon the euro behavior on the world markets more than some time earlier. Some of them do not rule out that the euro, now traded within the limits of $1.13-1.19 per euro, will still drop to the bottom level of the corridor. In this situation the RF Central Bank will have to focus on the ruble rate and work on weakening of the ruble rate. This will entail an insignificant increase of the dollar rate with respect to the ruble, up to 30.4-30.45 rubles per dollar.

If the dollar starts increasing on the world markets, the dollar-to-ruble rate will inevitably increase as well. But analysts suppose this won't happen within the nearest weeks. There are few people in Russia who believe the situation with the dollar will develop according to an optimistic scenario. The situation will depend upon the macroeconomic data on the US's economy. This statistics will confirm or refute the expectations concerning reviving of the American economy; it will have an effect upon the dynamics of the dollar-to-euro rate. These factors will hardly have an immediate effect upon the market. That is why the tendencies we observe now are highly likely to persist. In this connection, analysts with a more realistic turn of mind say that the ruble will strengthen its positions and the dollar may soon cost less than 30 rubles.