(Recasts, updates prices, adds comment, changes byline and
dateline, previous LONDON).
* Sterling hits 2-year low at $1.8407
* Dollar supported by prospects of rate cuts outside U.S.
* U.S. July existing homes sales at 10 a.m. (1400 GMT)
By Nick Olivari
NEW YORK, Aug 25 (Reuters) - The U.S. dollar was lower
against the yen and steady against the euro on Monday ahead of
a report on U.S. existing home sales for July which could add
to recent signs of stability in the U.S. housing market.
Economists polled by Reuters are expecting existing home
sales to rise to a 4.90 million rate in July with the data set
for release at 10:00 a.m. (1400 GMT). A recovery, or at least
stabilization, in the U.S. housing market is seen as critical
to ending some of the concern on the U.S. economy.
The British pound hit two-year lows against the dollar on
Monday, with stalled UK growth seen as another example of
growing economic malaise outside the United States. The pound
later recovered but its weakness helped the revival of the
dollar against some currencies including the euro. Trade was
thin in Europe due to a UK public holiday.
"We have thin markets with London out so we could see some
silly moves," said Ron Simpson, director of FX currency
research at Action Economics in Tampa, Florida.
Sterling bounced up 0.1 percent to $1.8542 <GBP=> as the
New York session opened, having fallen as low as $1.8407
earlier -- its lowest since July 2006, according to Reuters
data. The pound is down 6.6 percent against the dollar in 2008,
the largest drop of any major currency other than the New
Zealand dollar.
Data on Friday showed the UK economy ground to a halt in
the second quarter of the year, its worst quarterly performance
since 1992, highlighting the risk of a British recession and
raising the chance of a UK interest rate cut later this year.
"The growth number confirmed our worst expectations. We've
seen that the fall in house prices in the UK seem to have no
end. We cannot detect this bottom in house prices that everyone
seems to be looking for," said John Hydeskov, senior FX analyst
at Danske bank in Copenhagen.
The dollar index, measuring the U.S. unit's value versus a
basket of six major currencies, was 0.2 percent lower at 76.660
<.DXY>.
The euro was little changed at $1.4800 <EUR=> and down 0.4
percent at 162.15 yen <EURJPY=>, while the dollar eased 0.4
percent at 109.57 yen <JPY=>.
The euro remained little changed after news the IMF is
cutting its 2008 growth estimate for the euro zone to 1.4
percent from 1.7 percent, according to a source. The IMF
forecast for 2009 was revised to 0.9 percent versus 1.2
percent, the source said. For more details, click
[].
DOLLAR POISED FOR GAINS
In addition to stalling economies in the euro area and
Japan, the UK growth scenario helped fuelled a view that
interest rates outside the United States may be headed lower,
supporting the case for an extension of the dollar's gains.
Bank of Japan Governor Masaaki Shirakawa said on Monday the
nation's economic growth will likely remain sluggish due to
high energy costs and slowing export growth [].
"The general sentiment towards lower rates and towards the
U.S. economy managing to get out of the global crisis earlier
than the other economic areas will support the dollar over the
next couple of months," said Antje Praefcke, currency
strategist at CBCM in Frankfurt.
Wile the global economic slowdown and the outlook for
monetary easing outside the United States were supportive, some
market participants remained sceptical about the dollar's sharp
gains due to persistent worries about the U.S. financial
system.
In addition to problems at U.S. mortgage finance companies
Fannie Mae <FNM.N> and Freddie Mac <FRE.N>, and speculation
over investment bank Lehman Brothers <LEH.N>, traders will also
be scrutinizing the slew of U.S. housing data this week. Data
on new home sales for July and two surveys of nationwide house
prices are expected to be released on Tuesday.
(Additional reporting by Veronica Brown in London)
(Reporting by Nick Olivari; Editing by Tom Hals)
