Dollar slides against the euro

LONDON (AFP) - The dollar dropped to a four-month low point yesterday against the yen and slid against the euro amid increasing concerns about the US economy.

In late European trade the single currency was changing hands at 1.3787 dollars, against 1.3775 late Friday in New York.

The dollar rose to 118.06 yen, against 118.02 yen late on Friday.

During Asian trade yesterday the euro struck 1.3839 dollars, not far from its all-time high of 1.3852 dollars which was reached on July 24.

In early Tokyo trade, the dollar fell to 117.18 yen -- a four-month low.

Players will on Tuesday be watching the US Federal Open Market Committee for a softening in the previously hawkish rhetoric adopted by the rate setters.

"If this is not delivered, it is likely that we see further selling pressure for the dollar as the market analyses the Fed as falling behind the curve, failing to halt a financial problem and probably even inducing a harsher economic slowdown," BNP Paribas analysts said.

The weaker-than-expected US non-farm payrolls numbers and fears over the potential spillover effect from a substantial downturn in credit markets have combined with concerns that the Federal Reserve will not be in a position to cut interest rates any time soon.

The euro was faring well across the board, surging to two-month highs against the pound as the currency benefited from safe-haven flows as well as much stronger than expected German industrial orders data this morning.

The pound edged lower meanwhile.

Data released yesterday showed British manufacturing output expanded for the fourth consecutive month during June -- the first time in eight years that the country has seen such a run of expansion -- but failed to suggest there will be any chance of an upward revision to second quarter GDP as a result.

Elsewhere, the yen came off earlier highs, though remained above Friday's levels.

Ongoing credit problems and stock market losses had benefited the yen overnight as investors edged away from risky carry trades -- where money is borrowed in low-yielding currencies such as the yen in order to invest in higher-yielding currencies elsewhere.

The currency was off earlier highs, however.

"The yen started the week on a firm tone as shaky equity markets and ongoing warnings on credit conditions continue to squeeze yen-funded growth trades," said Daniel Katzive at UBS.