The Labor Day break hasn't helped the negative view of the euro. Following Friday's soft U.S. jobs data, the euro managed to stage a rally of about 1.5% above its lows, but that gain proved fleeting.

The euro drifted down in trading overseas yesterday and today. As the New York market opens this morning, the euro is back near its all-time lows--$0.8840-- and is now at $0.8885.

"The euro is crumbling again and is within spitting distance of last week's low," said Neil Mackinnon of

Merrill Lynch

in London. "The dollar seems to have shrugged off last week's data."

The euro failed to maintain its improvement because the market believes that the euro zone economy will be damaged by the recent interest rate hike from the

European Central Bank

. "There's a view that higher interest rates are not good for euroland growth," Mackinnon said.

Euro zone industrial producer prices rose by 0.5% in July, 5.5% year-on-year. These numbers were slightly softer than expected and added to the view the economy of the 11-member group is still soft.

And perhaps more of a problem is growing doubt over the strategy and commitment of the euro zone financial authority, the ECB. Newspapers are reporting that there are differences of opinion among key players at the ECB over interest rate policy. "Specifically, for the euro, there's issues of the credibility of the ECB," said Mackinnon. " I think we're in a position where the euro's downtrend can take on a life of its own."

The yen lost ground to the dollar, while making gains against the euro. Overall, the Japanese currency is weaker than Friday's close at 106.05.

Japan's Economic Planning Minister,

Taichi Sakaiya

, seemed to suggest he was happy with the level of the yen. "Within a range of 100 to 110 is relatively comfortable," he told a press conference.

Sterling has dropped back to last week's 7-year lows in dollar terms, as it is dragged lower by the euro's weakness. Cable--sterling/dollar-- is opening at $1.4510. The euro's losses have obviously impacted the euro/sterling rate, which is opening lower at 61.20 pence.

U.K. house prices rose 0.5% in August, but declined on an annualized basis to 7.4%, according to a survey by the

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Halifax Group

.

Dollar/Swiss franc rallied towards its best levels of last week at 1.7430. The euro/Swiss franc rate moved in favor of the Swiss franc at SF1.5485.

The Canadian dollar is opening at C$1.4740, after giving back a good part of last week's rally as the U.S. dollar returns to favor. The outlook for Canada is seen as promising, with the economy putting in strong results.

The Australian dollar is slipping and is half-a-cent below Friday's close at $0.5720. The market does not expect a rate hike at today's

Reserve Bank

meeting.

Not surprisingly, the New Zealand dollar has also sold off and is back down at $0.4275. The New Zealand Finance Minister,

Michael Cullen

gave modest words of support for his currency. "The

NZ dollar has been rather oversold and is undervalued and a market correction will occur," he said.

In emerging markets, the dollar is pressuring individual currencies. In particular, the Philippine peso is reeling from a confidence crisis, exacerbated by internal conflicts. It slipped through a key 32-month low at 45.50 pesos/dollar. The central bank was rumored to have sold U.S. dollars to support its currency.

The Indonesian rupiah is also under pressure at 8,320, awaiting a revised letter-of-intent for new funding from the

International Monetary Fund

.

The South African rand is losing ground as the domestic bond market is under selling pressure.

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