Greenback Submerged By Sinking Stocks by Stacey Yang
The dollar slid to new 7-month lows against the euro and Swiss franc late in the day, towed under by sinking US stocks. Earlier in US trading, the greenback had climbed up from its multi-month lows against the major currencies though remained weak in thin trading arising from holidays in the UK and Japan.
Moreover, traders worry that bearish dollar sentiment could continue to pervade markets this week, in an extension of last week's heavy selling prompted by dismal US economic data and loss of confidence in the US strong dollar policy after O'Neill's testimony. Currency markets are now awaiting tomorrow's FOMC rate decision, even though the Federal Reserve is seen to be unlikely to change monetary policy in light of relatively benign inflation and the recent labor market report underscoring that a US economic rebound is still far off in the future.
EUR/USD climbed up half-a-cent to a fresh 7-month high of 91.85 cents, pulling the Swiss franc up more than a full centime to a new 7-month high of 1.5849 against the dollar. The euro was encouraged by unofficial reports that Germany's unadjusted jobless count declined by 132,000 to 4.024 mln in April from March. Earlier, the single currency was little moved despite a gain in the Eurozone Services PMI to its highest level in 13 months to 53.3 in April, nor was it visibly affected by Germany's first engineering workers' strike in 7 years since markets had been expecting it. Meanwhile, CFTC IMM futures data showed that speculators were net long 31,472 euro/dollar contracts in the week ending on April 30th, the largest net positive positions since the introduction of the euro and surpassing last week's record for highest ever net long positions. Upside capped at 91.85, 92.0 and 92.50. Support is viewed at 91.30, 90.50 and the 90-cent figure.
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