Dollar suffers in Europe on talk of U.S. rate cut
Monday September 7, 7:49 am Eastern Time
(Note: this article is ''in progress''; there will likely be an update soon.)
LONDON, Sept 7 (Reuters) - Growing expectations the U.S. could be moving closer to cutting interest rates dealt a fresh blow to an already weak dollar on Monday.
Currency markets seized on remarks at the weekend by U.S. Federal Reserve Chairman Alan Greenspan that the U.S. Central Bank no longer viewed inflation as the main threat to the U.S. economy.
''Greenspan seemed to be downplaying inflationary pressures. He seemed to hint at moving to a neutral bias on monetary policy,'' Tim Fox, chief treasury economist at Standard Chartered in London, said.
''The market seems to be taking a view that the dollar's going to remain soft near-term,'' Fox said.
Analysts said Monday's rally in Asian stocks and ongoing concern about Latin America -- the latest victim of panic in emerging markets -- were other factors adding to the dollar's woes.
''The outlook remains one of continuing dollar weakness. There's little change to background themes in which traders and investors are continuing to scale back their positions,'' Paul Meggyesi, senior currency economist at Deutsche Bank in London, said.
The dollar pushed to a fresh 9-1/2 month low against the mark of 1.7168. By 1115 GMT it stood at 1.7190/95, well below late Friday's 1.7345/55.
The rally in Japanese and Asian stocks helped the yen to strengthen to a four-month high of 130.64 in earlier trade but had pulled back to 130.86/96 at midday Europe. It stood at 133.93/134.03 late Friday.
The bullishness in Asian markets was underscored after Hong Kong announced steps on Monday to tighten rules governing its financial markets, particularly on short selling of stocks.
The U.S. was on holiday on Monday which dealers said might provide the dollar with some stability for now. However, the market remained anxious about the impact on the U.S. economy of emerging market volatility.
''Clearly Latin America is on the verge of repeating the Asian and Eastern European experience. That is going to call into question quite how insulated the U.S. economy, and therefore the dollar, are from the emerging markets contagion,'' Meggyesi said.
Russia's unresolved political and economic crisis also remained a nagging factor for currency markets.
(Note: this article is ''in progress''; there will likely be an update soon.) |
