Date:   10/26/2004 10:04:06 AM ( 20 y ago)
Hits:   3,594
URL:   https://www.curezone.org/forums/fm.asp?i=18548

0 of 0 (0%) readers agree with this message.  Hide votes     What is this?

Dollar Fall Gathers Momentum

Thu Oct 21, 2004 06:31 AM ET
By Justyna Pawlak


LONDON (Reuters) - The dollar fell to an eight-month low against the euro on Thursday, also setting multi-month lows versus the yen, sterling and the Swiss franc amid worries the U.S. economy was not growing enough to support its currency.

Recent data have shown a rise in the U.S. current account deficit on the back of high oil prices and a thinning of investment flows into the U.S. This exposed the dollar to the potentially damaging effect of the country's external shortfall.

Investors' concerns that this process could accelerate have pushed the dollar to within three cents of the record lows it set against the euro in February.

"The dollar is under widespread downward pressure as the market is focusing back on structural influences and away from the cyclical upturn which had been the main theme for many months," said Mark Austin, chief currency strategist at HSBC Markets in London.

The dollar fell to $1.2651 per euro, its lowest level since late February. However, it recouped some of its losses by 0600 EDT to trade at $1.2615, a quarter percent gain from the U.S. close.

It also fell to its lowest level in nine months versus the Swiss franc at 1.2150 and a four-month trough against the yen at 107.47.

But Japan's vice finance minister Koichi Hosokawa said his ministry would continue monitoring moves in currencies carefully and take appropriate action if needed.

Sterling extended its gains versus the dollar to a fresh two-month high at $1.8301 after data showed UK retail sales rising more than expected in September.

High-yielding currencies such as the Australian and New Zealand dollars also scored multi-month records against the greenback. The Canadian dollar also held near its recent 11-1/2 year high.

WHAT'S NEXT?

After the dollar slid past a series of key chart levels this week, investors were likely to continue focusing on tests of technical support and comments from European and U.S. officials for clues about the near-term dollar outlook.

Austrian Finance Minister Karl-Heinz Grasser said on Thursday the euro's exchange rate reflected the bloc's fundamentals.

But for the market the key question was whether the dollar would continue to slide past the February lows and toward $1.30 per euro.

"The cyclical side of things has been disappointing so the structural side has re-emerged and this is keeping the dollar on the back step," said Paul Mackel, currency strategist at ABN AMRO in London.

Federal Reserve Bank of St. Louis President William Poole was scheduled to speak at 0930 EDT and U.S. Treasury Secretary John Snow was due to participate in a financial forum with local business owners at the same time.

Federal Reserve Board Governor Ben Bernanke was also due to speak about oil and the economy at 1200 EDT.

The Philadelphia Federal Reserve's gauge of manufacturing activity for October in the U.S. Mid-Atlantic region was also scheduled for 1200 EDT.

Economists' forecasts for the business activity index ranged from a reading of 9.0 to 23.0, compared with 13.4 in September. The median was 17.0.

Any signs of weakness in manufacturing was likely to boost concerns about the pace of U.S. recovery and the outlook for U.S. monetary policy. Prospects of more interest rate hikes in the U.S. were the main factor that could help the dollar at a time when the trade deficit was on the rise, analysts said.

Data on Monday showed net fund inflows to U.S. markets dropped to $59.0 billion in August, the lowest figure in nearly a year and barely above the level needed to finance the trade deficit.

WHO WINS?

Analysts said the U.S. presidential elections were also increasing uncertainty in currency markets as some expected Senator John Kerry to support a more protectionist economic agenda which could include a weaker dollar policy.

Latest polls show Kerry and President Bush in a dead heat ahead of the November 2 polls.

"People are worried the dollar is going to be under downward pressure after the election and if you think it's going to be under pressure then, you sell it now," said Austin from HSBC Markets.

"The election is too close to call and Kerry is seen as more protectionist and happy to see a lower dollar."


 

<< Return to the standard message view

fetched in 0.05 sec, referred by http://www.curezone.org/forums/fmp.asp?i=18548