Dollar Advances vs. Yen, Ends Little Changed vs. Euro
Wed Apr 23, 5:43 PM ET
By Michael Deibert
NEW YORK -- The dollar split its performance against its major rivals Wednesday, stabilizing after sharp losses Tuesday but yielding center stage to more exciting currencies.
quotes.ino.com
The euro, which hit a fresh four-year high above 132 yen in New York trading, proved more attractive to investors given Japan's low interest rates and poor economic condition. The dollar's propensity for manifesting weakness at the slightest sign of bad news has also helped, analysts said.
With the economies of the U.S., Japan and the euro zone all looking bleak, investors are paying more attention to interest-rate differentials and are seeking to buy higher-yielding currencies.
"There's a feeling in the investment community that the dollar is soft and likely to weaken further," said Tim Stewart, chief economic strategist with Morgan Stanley in New York. "Yield is still a theme and as a result the dollar, the yen, and the Swiss franc are all somewhat weak."
Low-interest rate nations such as Japan, the U.S. and Switzerland have been increasingly shunned in favor of countries that offer higher interest rates, such as Canada and Australia.
While the European Central Bank's benchmark rate of 2.50% may not be comparable with Brazil's benchmark of 26.5%, it is nevertheless more attractive than those offered in Japan and the U.S.
"If U.S. yields popped above the euro-zone yield, you would see a shift in flow back into dollars," said Tom Rogers, currency analyst with the International Financial Review in New York. "Until that happens its difficult to see how the dollar is going to gain substantially."
Although the dollar spiked higher against all currencies but sterling early in the New York session, many of the gains had been moderated by late afternoon.
Late Wednesday, the dollar was trading at 120.40 yen, up from 119.94 yen late Tuesday in New York. The euro stayed below $1.10 and was trading at $1.0967, little changed from $1.0972 late Tuesday. Against the Swiss franc, the dollar was changing hands at 1.3738 francs, up from 1.3708 francs late Tuesday. Sterling was at $1.5877, up compared with $1.5762 Tuesday.
As the dollar continued to struggle against the euro, the euro itself has also been making noticeably broad strides against the yen in recent days, with Europe's common currency breaking to a four-year high on Monday and continuing upwards in what analysts say is a likely signal of gains to come.
"We think that the euro will go up further against the yen," said Rebecca Patterson, global currency strategist with J.P. Morgan Chase in New York. "It's a function of both the euro's strength as well as the continuing search for yield in currencies."
Copyright (c) 2003 Dow Jones & Company, Inc. |
