Dollar finds support
Metals-linked currencies lead decliners
By Emily Church & Lisa Twaronite, CBS.MarketWatch.com
Last Update: 7:59 AM ET Dec. 8, 2004
LONDON (CBS.MW) - The dollar found its footing on
Wednesday, recouping as commodity-linked currencies
like the Australian and Canadian dollars stumbled on
weak spot metals prices.
The 'Aussie' slumped as much as 2 percent against the
dollar to 75.94 U.S. cents. The dollar rose 0.9
percent against the 'loonie.' The declines took hold
as metal prices fell, said Gary Noone, a currency
analyst at Informa Global Markets in London.
At one point, silver prices were down as much as 4
percent, and copper saw declines of around 3 percent
on the day.
The metals declines "helped support the dollar against
the Austrian and Canadian dollars, which gave a lot of
impetus to the dollar against the euro and the yen,"
he said.
Separately, the Australian central bank overnight left
interest rates unchanged. While the decision was
expected, it nonetheless bolstered market expectations
that wide spread in U.S. vs. Australian interest rates
is set to narrow.
The dollar rose 0.8 percent against the euro to
$1.3321 - a day after striking fresh historic low
against the common currency. The British pound eased
0.6 percent to $1.93 and the dollar rose 1 percent on
the Japanese currency at 104 yen.
Tokyo action
The dollar gradually ticked high against the yen in
Asia Wednesday, as investors used the mixed signals in
revised Japanese gross domestic product data as an
excuse to cover dollar short positions.
Data released in the morning showed Japan's economy
grew 0.1 percent in real terms in the July-September
quarter, unchanged from the initial estimate, the
Cabinet Office said. That translated into 0.2 percent
annualized growth, slightly down from the 0.3 percent
expansion reported in the preliminary data.
Although the dollar initially moved little after the
data was released, as the headline figure didn't show
much change, it edged higher in the afternoon session
as investors mulled the data's details.
The revised data was in the spotlight because it was
the first to incorporate a new calculation method for
the GDP deflator, which measures price changes.
Some private-sector economists had expected the data
might be revised upward after the Finance Ministry
data showed last week that capital spending by
Japanese companies rose a robust 14.4 percent in the
third-quarter from the year-ago level.
While capital spending was in fact revised upward,
private consumption was revised downward, and Japan's
second-quarter GDP was revised down to an annualized
0.6 percent contraction in real terms, instead of the
1.1 percent expansion that the government had
calculated under the old method.
"If the series conveyed any useful information, this
could be taken as disappointing, but the revisions
have become a joke. The release does not help to
resolve the question of how much growth has slowed,"
said Richard Jerram, chief Japan economist at
Macquarie Securities in Tokyo.
"Even though the past ten years of data was completely
revised in mid-November with the change in
methodology, the Cabinet Office has again revised all
of the historic data extensively," he said in a
research note. "Japanese GDP is such a rapidly moving
target it is hard to make a sensible comment on the
latest version of history, as it is likely to change
repeatedly in the future."
But currency investors nonetheless used the data as a
cue to begin covering short positions, and more
short-covering could lie ahead this session, said J.P.
Morgan.
"With no major releases and events today, positions
could remain a main driver," the bank said in a
research report. According to its internal fund flow
data, "speculative short positions in U.S. dollars are
still stretched. This suggests the risk for further
U.S. dollar shortcovering."
Emily Church is London bureau chief of
CBS.MarketWatch.com.
Lisa Twaronite is Asia Bureau Chief for CBS
MarketWatch, based in Tokyo. |
