Dollar suffers steep declines vs euro, yen in U.S.
(Rumors of Soros shorting US$???)
NEW YORK, July 19 (Reuters) - The dollar fell sharply against the euro and yen in hectic midday U.S. trade on Monday, prompting speculation of central bank action, traders said.
The euro leaped more than a full cent against the dollar to a high of $1.0336 before paring back some gains. The dollar, meanwhile, extended steep overnight declines against the yen to hit five-week lows around 118.60.
''Nobody knows why yet,'' said Mark Gargano, head of currency derivatives at First Union National Bank. ''I have to believe it's intervention -- that's all I can bet on, because there's nothing in the commentaries that makes any sense at all.''
Germany's Bundesbank, the European Central Bank and the Federal Reserve Bank of New York said they had no comment on market talk of possible intervention.
In overnight trade the yen had rallied strongly against both the dollar and the euro, as the market dared the Bank of Japan to step in to tame the yen's strength.
As U.S. trade opened, the dollar extended its declines against the yen but the euro bounced off its lows versus the greenback on what traders said was European short covering.
Some traders said that as the euro pushed above the $1.02 level, it triggered large buy stops and sailed still higher.
At midday, the euro stood at $1.0202/04, up from a weak start at $1.0139/43, and shortly thereafter it sped past $1.03 to its highest level since July 1.
Dollar/yen, meanwhile, traded at 119.10/20 at noon, down from 119.69/79 at the open before tumbling still lower.
Dramatic, sharp moves were also seen in other currency pairs, with the dollar feeling the sharp end of the stick. Sterling rocketed to $1.5783, the highest since July 6, after trading at $1.5628/38 at noon and $1.5572/82 at the start.
Dollar/Swiss tumbled to a session low of 1.5570 francs, from 1.5730/40 at noon and 1.5839/49 at the open.
Warning: part of the article may be missing at this point.
Another of Germany's ''Five Wise Men'', Juergen Kromphardt added after the rally that it was possible for the euro to slip below parity with the dollar, but that it stood an equal chance of strengthening from its current level.
And ECB Vice President Christian Noyer restated the bank's view that stable euro zone prices will make it possible for the euro to recover recent losses. ''The exchange rate is monitored closely as one important indicator within our stability-oriented monetary policy strategy,'' Noyer said.
The euro, has lost some 12 percent of its value against the dollar since it started trading at $1.1740 on January 4.
The euro also rallied sharply off its lows against the yen. After falling to fresh lifetime lows near 121, euro/yen bounded back above 122. But traders said shortcovering was the likely reason and dismissed market rumors that the Bank of Japan may have intervened earlier in euro/yen.
''There's probably been more talk of central bank intervention than action,'' Paribas' Lynch said.
The Canadian dollar, which had fallen sharply in early trade against the dollar, was sidelined and little changed from the open. The U.S. currency stood at Canadian $1.4910/20, against $1.4913/23 at the start of trade.
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