* Dollar gains versus most majors in safe have bid
* U.S. factory activity shrinks further in October
* U.S. election a key focus
(Recasts, updates prices)
By Nick Olivari
NEW YORK, Nov 3 (Reuters) - The dollar rose against the yen
and trimmed losses against the euro to trade little changed on
Monday as weak U.S. economic data prompted some investors to
buy the currency as a safe haven.
U.S. factory activity shrank further in October to its
lowest in 26 years, according to an industry report released on
Monday.
Thin trading added to market volatility with some investors
waiting for big news events later in the week such as the U.S.
Presidential election, central bank decisions from the European
Central Bank, Bank of England and Reserve Bank of Australia,
and the U.S. jobs report on Friday before placing big bets.
"It's counterintuitive, but this may help support the
dollar even as it undermines confidence in the U.S. economy,"
said Michael Woolfolk, senior currency strategist Bank of New
York-Mellon of the manufacturing report "The dollar has been
the beneficiary in this global financial crisis."
Midway through the New York session, the dollar was up 0.3
percent against the yen at 98.75 yen <JPY=>, 0.8 percent
against the Swiss franc <CHF=> at 1.1668 francs, while sterling
fell around 1.4 percent against the dollar to $1.5846 <GBP=>.
The Institute for Supply Management said its index of
national factory activity fell to 38.9 in October from 43.5 in
September. Economists had expected a reading of 41.5, according
to the median of forecasts in a Reuters poll. For more details,
click [].
The euro was little changed against the dollar on the day
at $1.2728 <EUR=> but well off the session high of $1.2898. The
euro rose 0.2 percent to 125.64 yen <EURJPY=>.
MORE RATE CUTS IN SIGHT
Though U.S. economic data stoked some currency action in
the opening hours of the New York session, most investors were
focused on the event risk for the week, which includes the U.S.
presidential election on Tuesday [].
Democrat Barack Obama is still seen as the front runner
over Republican John McCain in the final day before voting
begins.
A win by Obama is seen as marginally better for the dollar,
if only because the Democrats already control Congress which
may make it easier for an Obama administration to push through
policies.
On the monetary policy front, the European Central Bank,
the Bank of England and the Reserve Bank of Australia are all
expected to lower interest rates to protect their struggling
economies from the threat of a looming global recession.
Each of them is expected to cut rates by at least half a
percentage point. The U.S. Federal Reserve last week cut its
key rate by half a point to 1.0 percent and the Bank of Japan
(BoJ) cut its rate to 0.30 percent from 0.50 percent.
Analysts said Britain's central bank could cut rates by
more than the half percentage point that is expected. Lower
relative rates reduce the attractiveness of
sterling-denominated securities and cut demand for the pounds
to buy them.
"The U.S. dollar is largely range bound as markets await
the numerous events of the week," said Marc Chandler, global
head of currency strategy at Brown Brothers Harriman in a
research note to clients. "While the U.S. elections tomorrow
will clarify who will run the next Administration, the real
event risk is with the BOE Thursday, where there is a risk of a
larger than expected rate cut, and U.S. jobs data Friday, where
there is a risk of an even weaker than expected report."
(Additional reporting by Steven C. Johnson)
(Reporting by Nick Olivari; Editing by Diane Craft)
