"Dollar Falls on Stock Slide, Report Saudis Selling U.S. Assets"
quote.bloomberg.com
08/21 00:14
Dollar Falls on Stock Slide, Report Saudis Selling U.S. Assets
By Kanako Chiba and John Brinsley
Tokyo, Aug. 21 (Bloomberg) -- The dollar declined against the yen, snapping a three-day gain, after U.S. equities dropped yesterday and on a newspaper report Saudi Arabians withdrew as much as $200 billion in U.S. assets amid rising U.S.-Arab tension.
The dollar fell to 118.11 against the yen as 1:08 p.m. in Tokyo time, compared with 118.80 in the late New York trading yesterday. Against the euro, it fell to 98.40 from 97.88. The dollar is down 10 percent against both currencies this year.
``The decline in the stock market reminded us that nothing has changed with our concern for the U.S. economy,'' said Yasuharu Tsuru, a foreign exchange manager at Mitsubishi Trust & Banking Corp.
Saudi investments in U.S. stocks, private equity, bonds and real estate are between $400 billion and $600 billion, the Financial Times newspaper reported yesterday. Between $100 billion and $200 billion of that was sold after some U.S. commentators called for a freeze on Saudi assets, the report said, citing Youssef Ibrahim, a senior fellow at the Council on Foreign Relations. The money is probably moving into European assets, the paper said.
``The euro is firming against the dollar due to the story going around the market today Saudi Arabia is yanking money out of the U.S.,'' said Ronald Leven, foreign exchange strategist at Lehman Brothers Japan Inc. ``Otherwise, European news is so bad.''
The yen was also helped against the dollar as Japanese bonds rose, pushing 10-year yields to their lowest level in more than a year, increasing demand for currency.
``A surge in the bond market is bringing capital inflow,'' said Hidenobu Yanagisawa, deputy general manager of the international treasury division at Fuji Bank Ltd.
U.S. stocks
Both the Dow Jones Industrial Average and Nasdaq Composite Index fell 1.3 percent yesterday. The Dow is down 11 percent and the Nasdaq 29 percent this year.
The slide in stock prices and doubts about a pickup in business investment pose threats to the world's largest economy, analysts said, which grew at a 1.1 percent annual rate from April through June after expanding at a 5 percent pace in the first three months of the year.
The economy expanded 0.3 percent last year and the latest Blue Chip Economic Indicators consensus is for 2.3 percent growth this year.
Germany
The dollar's decline against the euro was limited on expectations a report tomorrow will show growth in Germany, Europe's largest economy, probably stalled in the second quarter.
The German economy probably grew 0.2 percent between April and June, the same rate as in the previous three months, according to the median forecast of 14 economists surveyed by Bloomberg News.
German Chancellor Gerhard Schroeder on Monday said he's delaying tax cuts worth 6.9 billion euros ($6.8 billion) to assist victims and repair damages from the worst floods on the nation's record.
``The weak German growth report will bring the market focus back to Europe's stalling economy, which is much worse than that of the U.S.,'' said Hiroshi Sakuma, a foreign exchange associate director at Barclays Bank Plc. ``Now that Germany cannot implement fiscal stimulus, that will push the euro down.''
Fed Officials
The U.S. currency may extend its loss on speculation three Federal Reserve officials -- Philadelphia Fed President Anthony Santomero, Chicago Fed chief Michael Moskow and San Francisco Fed President Robert Parry - may signal slowing growth in the economy when they give speeches today, analysts said.
The Fed policy makers last week said ``weakness in financial markets and heightened uncertainty related to problems in corporate reporting and governance'' are hurting the economy.
``Given the Fed changed its bias last week, with one more sign that growth is slowing, we will pay very close attention to what the Fed officials have to say today,'' said Takeshi Minami, a senior economist at UFJ Capital Market Securities.
In other trading, the dollar fell to 1.4920 Swiss francs from 1.5008 in New York. Against the British pound, it dropped to $1.5339 from $1.5289. |
