LONDON (AFP) - The dollar eased back, dropping below 106 yen for the first time in six months amid worries about the US economic outlook and the deadlocked race for the White House.
The single European currency rose to 1.2757 dollars in early European trading from 1.2744 late on Thursday in New York.
The dollar dropped to 105.96 yen against 106.27. At one point the US currency fell to as low as 105.82 yen, the lowest level since April.
At such levels, dealers were wary of intervention by the Japanese authorities to limit the appreciation of the yen.
The greenback was under pressure ahead of the release of key US growth data and consumer sentiment figures, after a brief rally Thursday sparked by a surprise Chinese interest rate hike faded.
US data looked set to be mixed, analysts said, showing that the economy posted healthy growth in the third quarter, but with the University of Michigan index showing oil prices and sluggish labour markets depressed consumer sentiment in October.
Markets were also jittery about next week's neck-and-neck US presidential election vote, amid claims of illegal voting, intimidation and other irregularities in Florida.
"We think that investors will choose to sell the dollar into any rallies on the back of strong data as nervousness about the closeness of the election outcome continues to weigh on near-term dollar sentiment," Dresdner Kleinwort Wasserstein analysts said.
The US currency had risen briefly on Thursday after China's central bank raised interest rates for the first time in nine years in an effort to put the brakes on growth and avoid an economic crash.
The move prompted concerns about a cooling of demand for commodities including base metals and oil, of which China is a major consumer.
However, the appreciation of the dollar after the announcement was short-lived "based on the conclusion that the move in itself will have limited impact on commodity prices and interest rates in the US," said Derek Halpenny, economist at Bank of Tokyo-Mitsubishi.
Markets were trying to fathom whether the move signalled an intention by the Chinese authorities to change its policy of pegging the yuan to the dollar.
"We doubt the interest rate increase is a prelude to an announcement on moving to a more flexible exchange rate and maintain our view that this will take place gradually beginning around mid-2005," said Halpenny.
The euro was changing hands at 1.2757 dollars from 1.2744 late on Thursday in New York, 135.21 yen (135.46), 0.6957 pounds (0.6965) and 1.5274 Swiss francs (1.5287).
The dollar stood at 106.03 yen (106.27) and 1.1974 Swiss francs (1.1997).
The pound was at 1.8326 dollars (1.8293), 194.27 yen (194.36) and 2.1934 Swiss francs (2.1943).
On the London Bullion Market, the price of an ounce of gold stood at 426.25 dollars against 424.20 on Thursday afternoon.
10/29/2004 - 11:27 GMT - AFP