Frank. $ article today by Reuters correspondent:
"Dollar Extends Drop, U.S. Recovery Weighs
By Daniel Sternoff
NEW YORK (Reuters) - Extending a three-week fall, the dollar dropped to a two-month low against the euro and a three-month low against the Swiss franc on Wednesday on concerns a recovery in the U.S. economy and corporate profits may be grudging.
The dollar's losses came even as Treasury Secretary Paul O'Neill restated his commitment to a strong dollar, hammering home efforts to squelch market suspicions that Washington's support for a strong dollar policy may be slipping.
``We think the U.S. economy is probably bottoming out, but bottoming does not mean going back to the growth rates we saw in 1999-2000,'' said Anne Parker Mills, senior foreign exchange economist at Brown Brothers Harriman in New York.
``If that perception begins to settle in, that is truly dollar negative, because it means slow profits growth. It means that U.S. productivity has to prove itself,'' she said.
But she was not convinced that the dollar's fall from 15-year peaks on a trade-weighted basis hit earlier this month marked any wholesale reassessment of the relative attractiveness of investing in U.S. assets.
``I don't think enough has changed for the good in Euroland to provide a shift in fundamental expectations in the euro,'' she said, pointing to this week's slide in German business confidence to a five-year low.
In early U.S. trade, the euro (EUR-) traded just below 88 cents, up 0.6 percent from Tuesday's New York close and its highest level since May 21. The euro has gained more than 5 percent from its 2001 lows hit three weeks ago.
The Swiss franc (CHF-), which often moves in lock-step with the euro, rose 0.6 percent to 1.7120 francs per dollar.
The dollar also sagged about a third of a percent to 123.60 yen per dollar (JPY-), but held firmly within this month's 123 yen to 126 yen trading band. The euro pushed to a nine-week high against the yen just below 109 yen (EURJPY-).
WALL STREET HAS DOLLAR UNDER CLOUD
A cloud has hovered over the dollar this week as Wall Street has been hit by a wave of bleak corporate earnings reports and layoff announcements, and by a downbeat economic assessment by Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites).
The dollar on Wednesday shrugged off a report showing U.S. existing home sales dipped 0.6 percent in June to a 5.33 million unit annual rate.
The euro has also benefited from tame euro zone inflation data, seen clearing a major obstacle to a growth-boosting interest rate cut by the European Central Bank.
German producer price inflation slowed as expected to 4.3 percent year-on-year in June from 4.6 percent in May, offering further evidence of an easing of price pressures in Europe's largest economy. Month-on-month, producer price inflation slowed to 0.1 percent from 0.2 percent in May. The data were in line with consensus forecasts.
But New York traders said they were uncertain if fundamentals were fueling the euro's gains, saying it was sentiment driven and may merely reflect the fact that euro bears had sold the currency so sharply when it hit its year lows earlier this month.
``Originally, people were looking at a possible shift in dollar policy -- which hasn't been the case. But it is something that started it, and when people don't have long euro positions and it starts to move one way, it triggers a trend,'' said Brian Zirlin, a trader at CS First Boston.
``I don't see a reason to try and fight it, or a reason to explain why I would,'' he said.
Treasury Secretary O'Neill restated in an interview with the Financial Times that a strong dollar is in U.S. interests, and said the dollar's recent strength reflected America's productivity edge over other leading nations.
Doubts over Washington's commitment to a strong dollar policy gained force last week after President Bush (news - web sites) said the strong currency was hurting U.S. exports. Since then, the Treasury has stressed that policy remains intact.
NIKKEI WEIGHS ON YEN
The Nikkei share index (^N225 - news) has recovered some ground since hitting a 16-year low on Monday, and rose for a second day on Wednesday to 11,891.61. But worries Japan's hobbled economy may get worse before it gets better have been a millstone around the yen's neck.
Overnight, the market showed a muted response after Bank of Japan (BOJ) Deputy Governor Sakuya Fujiwara rebuffed speculation that the central bank may be considering buying foreign assets to weaken the yen to combat deflation." |
