NY FX: DOLLAR SLUMPS BROADLY AS SAFE-HAVEN FLOWS UNWOUND
NEW YORK (MktNews) - As fears of a Y2K-related computer glitch receded with the trouble-free opening of many of the world's financial markets the dollar slumped vs. a wide range of currencies late Monday morning as last week's safe haven flows were unwound.
Euro-dollar finally found some support and rallied to near $1.0170 from session lows around $1.0050. Buying from model-driven funds started around $1.0070 and continued as the pair broke above $1.0100, triggering stop-loss buy orders between $1.0120 and $1.0150, traders said. The fund buying was to partially cover outstanding short euro-dollar positions but, these players still have more interest, said a trader at a U.S. money center bank.
"I think many people are relieved there were no Y2K-related disruptions, so any dollars that were bought last week just-in-case are being sold now," said the trader.
Euro-dollar reversed to the upside in tandem with a downward reversal in the U.S. stock market as the Dow Jones Industrial Average was down over 180 points shortly after 11:15 a.m. EST. The tech-heavy NASDAQ was down over 70 points after opening up about 120 points as profit-taking pressures set in.
Dollar-yen was trading around Y101.60, just off earlier session lows near Y101.35. Modest bids at Y101.50 were easily absorbed but few orders remain on the books because Japanese corporates are on holiday until Tuesday, said a trader at a Japanese bank.
In addition, fear of Bank of Japan intervention to stem the yen's rise may be preventing traders from aggressively selling dollars further against the yen at these levels, the trader said.
The next support area is around Y101.25 which corresponds to the 1999 dollar-yen low, traders said.
Elsewhere in the market, the dollar also slumped vs. the Canadian dollar, the Australian dollar and the Mexican peso as investors returned to those currencies. IMM players were particularly active buyers of all three currencies and thin holiday conditions exaggerated the moves, traders said.
"If there is no danger point in the world, then you go for the high yield," said a trader at a U.S. money center bank in explaining the rush into the Mexican Peso. Mexican stocks and bonds were both significantly higher as Y2K fears abated although gains were pared after the U.S. stock market rally fizzled.
The dollar did not react to lower-than-expected December NAPM manufacturing index which registered a 55.5 reading from the previous month's 56.2. The prices paid components rose to 65.7 from November's 65.3 on the back of higher oil prices. |
