Reuters
Dollar Dips to Record Low Vs Euro on Snow
Friday December 12, 4:30 pm ET
By Manuela Badawy
NEW YORK (Reuters) - The dollar reached a lifetime low against the euro on Friday after U.S. Treasury Secretary John Snow said the dollar's decline was "orderly," a comment dollar bears took as a green light to sell the currency, analysts said.
"This is a deja vu of this spring when John Snow (News) was asked about the dollar decline," said Ashraf Laidi, chief currency analyst at MG Financial Group in New York. "And just about when the dollar had taken a sharp drop, he said the decline had been 'orderly,' which accelerated the fall in the currency, and we are seeing some of that now."
The euro reached a record high of $1.2306 (EUR=), according to Reuters data, before drifting back to $1.2292, a gain of 0.68 percent on the day.
Laidi said Snow's remarks left markets thinking that the government's strong-dollar policy is mere rhetoric and that the White House is in fact content to see further dollar losses.
Snow noted on Bloomberg Television, "The dollar on a traded-weighted basis is still higher today than it has been for most of the last 25 years."
Later, during the New York trading day, President Bush called for a strong U.S. dollar and suggested a strengthening U.S. economy should lend support to its value.
OVERALL SENTIMENT
The dollar had weakened earlier following a report that showed a surprising drop in U.S. consumer sentiment, in contrast to generally upbeat recent U.S. economic data.
The University of Michigan's preliminary reading of December consumer sentiment fell to 89.6 from November's final reading of 93.7. Economists had forecast a rise to 96.0.
The dollar rallied earlier this week as investors sold euros to lock in profits on its 9-cent move higher against the greenback in the last five weeks.
The dollar, already weak against the yen, remained down 0.32 percent to trade near 107.66 yen (JPY=).
After Japan's closely watched quarterly "tankan" survey showed big Japanese firms more confident about business conditions than at any time in the past six years, selling pressure increased on the greenback.
However, fears of intervention are thought to have put a cap on the dollar's losses.
Japan is concerned that a rising yen could harm the country's export-led recovery, making goods too expensive for foreigners. Finance Minister Sadakazu Tanigaki reiterated on Friday that recent currency moves had been too fast.
WIDER TRADE GAP
At the start of U.S. trade, the dollar had trimmed modest losses after the October U.S. trade gap data came in near estimates, confounding investors who had expected worse and had sold dollars ahead of the report, only to buy them back again.
In October the U.S. trade deficit widened to $41.77 billion versus an upward revision to $41.34 billion in September.
Other data showed U.S. inflation on the producer level fell unexpectedly in November, a move that carries a mixed message for the dollar. November's producer price index fell 0.3 percent versus expectations for a rise of 0.1 percent. Inflation on the wholesale level was up 0.8 percent in October. Excluding the food and energy sectors, prices fell 0.1 percent last month.
Falling inflation benefits U.S. asset markets and is another reason why the Federal Reserve can leave interest rates low for the foreseeable future. However, low U.S. interest rates versus higher rates among the dollar's peers means there is less incentive to purchase the dollar.
The dollar fell to 1.2615 Swiss francs (CHF=), a loss of 0.65 percent on the day. Earlier, Swiss National Bank chairman Jean-Pierre Roth called dollar weakness a problem but said that overall the forex situation was not bad.
Elsewhere, sterling climbed to a fresh 11-year high $1.7509 (GBP=), but dipped back to $1.7467, a gain of 0.18 percent.
(Additional reporting by Daniel Bases) |
