(Updates prices, adds quote, changes byline, dateline;
previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, April 29 (Reuters) - The dollar hit its highest
level against the euro in nearly four weeks on Tuesday, on
track for its largest monthly gain in nearly a year, amid
expectations the Federal Reserve will signal the end of its
easing campaign.
The Fed will begin its two-day meeting later on Tuesday and
analysts expect the policy-setting body to cut key borrowing
costs by a quarter percentage point to 2.0 percent and indicate
that its rate-cutting campaign is done for now.
By contrast, poor economic data out of the euro zone has
dented hawkish monetary policy sentiment.
French consumer confidence, for instance, fell to its
lowest since 1987 when the data series began, adding to a view
that the euro zone economy, and by extension European Central
Bank policy, isn't insulated from problems pushing the U.S.
economy to the verge of recession.
"The potential for the Fed to shift monetary stance as well
as weakening European data are all putting pressure on the euro
and supporting the dollar," said Camilla Sutton, senior
currency strategist at Scotia Capital in Toronto.
In early New York trading, the euro was down 0.7 percent to
$1.5550, having earlier hit a four-week trough at $1.5542
<EUR=> and was down 0.8 percent at 161.70 yen <EURJPY=>.
The euro was further undermined by data showing Spanish
calendar-adjusted retail sales fell a record 5.5 percent in
March, while German April inflation figures on Monday undershot
forecasts with the annual rate slowing sharply.
ECB Governing Council member Nout Wellink earlier said
slower German inflation was no reason to alter ECB policy, but
the comments did not reverse the single currency's fall. Euro
zone interest rates currently stand at 4 percent.
The euro also plumbed a four-week low against the pound at
78.31 pence <EURGBP=>, and last traded at 78.85 pence.
Bank stress stemming from the continued crisis in credit
markets saw further fallout in Europe as Deutsche Bank posted
its first quarterly loss in five years, leading it to reveal
further write-downs of 2.7 billion euros [].
The dollar was down slightly versus the yen at 103.93 yen
<JPY=>, on track for its best month in four years. Asian
trading turnover was very light as the Tokyo market was shut
for a holiday
The dollar index was on track for its best month since
November 2005 <.DXY>, benefiting from the view that U.S.
interest rates are nearing a bottom.
However this week's data on growth, consumption,
manufacturing and payrolls is likely to show the U.S. economy
is still deteriorating, implying there is still some risk that
rates are set to fall further.
U.S. consumer confidence data at 10:00 a.m. (1400 GMT) will
be watched for more insight into the extent of the U.S.slowdown.
Gross domestic product data on Wednesday could show the
economy actually shrank in the first quarter and Friday's jobs
report is expected to show payrolls fell 80,000 in April,
according to economists polled by Reuters.
"These releases will be important for what they say about
the economy in the second quarter and beyond rather than the
first quarter," said Brown Brothers Harriman in a research
note.
"Fed officials have already acknowledged that growth could
contract at some point in the first half so a further
deterioration in fixed investment, soft consumer spending and a
pick-up in first-quarter inventories are likely to confirm
current expectations."
(Additional reporting by Veronica Brown in London; Editing by
Andrea Ricci)
