Dollar Hits New Lows Versus Yen, Euro
Jun 21 10:52am ET
By Daniel Bases
NEW YORK (Reuters) - The dollar fell to a 7-month low against the yen on Friday, as investors cast aside recent hesitation to sell the greenback aggressively for yen after Japan's Ministry of Finance said it has no power to dominate foreign exchange markets.
Across-the-board dollar weakness continued, as flaccid U.S. stock prices helped the euro make a 26-month high against the greenback as investor confidence in U.S. assets wanes, and exacerbates the record U.S. trade gap.
Japanese Finance Minister Masajuro Shiokawa said he had a "bad feeling" about the yen's strength against the dollar on Friday having already admitted the ministry could only watch the trend in the markets with caution.
"We have no power to dominate the currency market," he said.
Investors interpreted the remarks to mean the likelihood of intervention may have lessened given the yen is below levels where Japan intervened four times in the last month, the latest on June 4, in order to stem its currency's export-crimping strength, an area of strength for the hamstrung economy.
"I am getting a bad feeling about it," Shiokawa said later on Friday about the yen's gains.
"That was just a green light to sell (dollars)," said Tod Van Name, senior vice president in the FX group at Mizuho Corporate Bank in New York.
"We keep drifting lower and there is no hide nor hair of the BOJ. Maybe they are baiting a bear-trap and letting people get short and then come in, but if they don't show their face, we are going to be visiting 120 yen and they have to know that," he added.
The dollar fell to 121.44 yen its lowest level since Nov. 13, 2001, a loss of 1.60 percent compared with Thursday's New York close. The dollar is down 7.70 percent against the yen so far this year.
Earlier, senior Finance Ministry official Zembei Mizoguchi said the ministry had not intervened in the market on Friday.
The euro also tumbled against the yen, dropping to 117.55 yen , a loss of 1.32 percent on the day, after earlier reaching a five-month high of 119.50 yen.
The greenback has fallen 8.5 percent against the euro this year, declining four cents in just a month. The euro traded to a 26-month high of 97.06 cents, up 0.60 percent on the day.
"We're seeing further evidence that sentiment on the dollar has changed. We see parity (against the euro) by the end of the year," said Ryan Shea, senior international economist at BankOne.
"The U.S. is still heavily reliant on overseas capital and this is turning fairly negative."
Data on Thursday showed the U.S. current account deficit reached record levels in the first quarter, and U.S. stocks tumbled to new lows for the year following continuing tension in the Middle East and a number of corporate profit warnings.
The fortunes of the dollar have been closely linked to those of ailing U.S. stocks in recent weeks, as investors lost their faith in the value of U.S. assets.
Sterling staked out a fresh 17-month high against the dollar, touching $1.5017 , before slipping to $1.4973, a small loss on the day.
The dollar hit a fresh 2-1/2 year low against the Swiss franc at 1.5169 francs , off 0.42 percent on the day even though the Swiss National Bank lowered its money market rate back below 1.0 percent only days after raising it.
EQUITIES STILL IN FOCUS
The U.S. equity benchmark Dow Jones industrial average <.DJI> extended its losses on Friday, trading down 0.64 percent or 60 points at 9371 after closing at its lowest level all year on Thursday, adding pressure to the dollar's downward spiral
"We continue to look at equities for a lead, but you have to believe the bias risk of risk is to the downside in the dollar looking ahead to next week's economic data," said Tim Mazanac, senior foreign exchange strategist at Investors bank and Trust in Boston.
"Consumer confidence -- over the entire week, I think that will be the number one indicator of how investors feel and maybe a make or break for equities next week. That would not be good for the dollar either," he added.
Consumer confidence for June is expected to fall to a reading of 108.8 from 109.8 in May, according to a Reuters survey of economists. |
