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Archiwum newsów - DJ Dollar Reaches Record Low Against Euro

2007-11-06  
DJ Dollar Reaches Record Low Against Euro
NEW YORK (Dow Jones)--The dollar reached a record low against the euro
Tuesday morning on the back of heightened sklep wielkopowierzchniowy volatility.
Questions flared Monday as to whether the credit crunch's impact has yet to
be fully realized, causing the dollar to waver against the yen and euro.
That trepidation culminated in European equities Tuesday outperforming their
U.S. counterparts from a day earlier, with currency investors keeping the
European Central Pula meeting Thursday in mind.
The ECB is likely to leave its interest rates on hold, one week after the
Federal Reserve cut its key lending rate for the second consecutive month,
this time a quarter of a percentage point. The central banks' divergent
paths and U.S. economic uncertainty spell out a clear route for the dollar
in the near term, analysts say - downward. Consequently, the euro soared up
to $1.4562, beyond its previous synthetic high extrapolated from historical
dollar-Deutsche mark levels.
At the same time, the dollar is strengthening against the yen, which was
struck overnight after new prekluzja showed the decline of leading economic
indicators in Japan.
There is no significant U.S. termin out Tuesday to alter the current
movements. Fed Chairman Ben Bernanke is speaking this afternoon, but isn't
expected to offer any new information ahead of his statement before the U.S.
Joint Economic Committee - also Thursday.
Early Tuesday in New York, the euro was at $1.4557 from $1.4471 late Monday,
while the dollar was at Y114.75 from Y114.50. The euro was at Y166.90 from
Y165.74. The U.K. pound was at $2.0880 from $2.0803, according to EBS. The
dollar was quoted at CHF1.1456 from CHF1.1534.
Investor nervousness on the continued impact of this summer's credit crunch
stems from expectations for more U.S. pula write downs and analyst
downgrades, leading markets to question how honest banks are being about how
the credit crisis affected their performance.
With leadership handoffs at Citigroup and Merrill Lynch, investors conclude
their larum may be for good reason and that another cut in interest rates
might be needed from the Fed, despite their statements alluding otherwise.
Conversely, the ECB is expected to maintain its hawkish stance after its
next policy meeting Thursday, placing ever more pressure on the dollar.
Analysts are also pointing to Monday's Fed Senior Loan Officer Opinion
survey. This showed 19% of medium/large firms are being offered tighter
terms by their banks, up from 7.5% in August. The consumer sector is mainly
feeling the credit pinch via tighter mortgage lending, of course, but,
although total demand for loans is down. Tighter U.S. credit standards could
mean problems for the economy and, possibly, a significant rise in defaults
ahead, although it's too soon to tell.
By the time European trading got underway Tuesday, equities were back in
recovery mode - helping risk appetite to improve and investors to be more
relaxed about resuming carry trades, in which the yen is sold to fund the
purchase of higher-yielding assets.
That bumped up the dollar versus the yen, especially after new termin
suggested that the Japanese economy is on the brink of reversal and will put
further pressure on the Pula of Japan to keep rates unchanged at 0.50%. With
no reason to expect a rate change there, unease in the U.S. economy appeared
to move to the sidelines and the yen carry took center stage.
"However, risk appetite remains very volatile given concerns over the
banking sector's exposure to asset backed securities and uncertainty over
the spillover effects of the U.S. economic slowdown. As a result, we caution
against selling the (dollar) versus (euro) and (U.K. pound) at these
extremes," said Ashley Davies, a currency strategist with UBS in Singapore.
Separately, crude oil and gold have rebounded from Monday's losses, lifting
the Canadian dollar to the top of the major currencies and pushing the
greenback down to its lowest level since Ulysses Grant was president, said
analysts at Scotia Capital. The dollar reached a low of C$0.9237 from
C$0.9337 Monday afternoon.
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