Dollar Softens in Thin Trade as Stocks Dip

The dollar fell against the euro in thin trade on Wednesday while the yen remained near seven-week lows as investors continued to fund carry trades by borrowing the low-yielding Japanese currency.

Wall Street edged lower with investors concerned about how U.S. retailers fared during the holiday shopping season. Most European markets remain closed for Christmas.

Currency traders initially shrugged off data showing U.S. home prices in October posted their biggest annual drop in the history of the S&P/Case-Shiller index.

While the data was two months old, it did stir some concern among investors who expect the dollar to resume a broad slide in 2008 as credit worries resurface and signs of a U.S. economic slowdown increase.

The yen fell after minutes from recent Bank of Japan policy meetings revealed officials were worried about high oil prices and the impact of slower U.S. growth on the Japanese economy.

Markets took that as a signal that the central bank won't soon be lifting its 0.5 percent interest rate -- the lowest in the developed world and the engine of carry trades that use cheaply borrowed yen to buy higher-yielding currencies.

Dollar Softens in Thin Trade as Stocks Dip, Reuters
12/26/2007 9:40:04 AM