Dollar Falls Below $1.25 Per Euro
Monday December 29, 1:32 pm ET
By Kyle Peterson
CHICAGO (Reuters) - The ailing dollar fell on Monday to a new record low against the euro beyond the $1.25 level and shed half a percent versus the yen on security worries and nagging concerns over the U.S. current account deficit.
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"The dollar continues to be undermined by three principle factors," said Alex Beuzelin, foreign exchange market analyst at Ruesch International in Washington DC. "(These are) relatively low interest rates, a record high current account deficit and the perception in the market that the Bush administration is amenable to an orderly dollar decline."
Analysts said weak U.S. economic data late last week and a rise in Japan's Nikkei share average (^N225 - News) to seven-week highs, which was helping the yen, added to dollar woes.
In thin holiday trade, the euro (EUR=) was up 0.49 percent at $1.2486 at midday after trading as high as $1.2511. The dollar also hit an 11-year low against sterling (GBP=) and came within sight of last week's seven-year low versus the Swiss franc(CHF=).
Against the yen(JPY=), the dollar was down 0.53 percent at 106.89 yen, just above a three-year trough around 106.75 yen, with the market wary that Japanese authorities could intervene to check further dollar weakness.
"The main negative is momentum, (which) remains bearish," said Peter Frank, senior foreign exchange strategist with ABN Amro bank in Chicago.
"There is no key impulse from data ... nor anything going on in the stock market: it seems to be technically driven and momentum-driven. The dollar is getting hammered against all the major cross rates," Frank said.
Against the Swiss franc (CHF=) the dollar was at 1.2490 francs, down 0.41 percent on the day. The pound (GBP=) was up 0.06 percent at $1.7723 after hitting 11-year highs above $1.7762 earlier in illiquid holiday season trade.
"The market remains thin, so moves are exaggerated. But you can't get away from the underlying problems that are surrounding the dollar, particularly the current account deficit," said Paul Robson, international economist at Bank One.
The U.S. current account deficit, around 5 percent of gross domestic product, is proving one of the biggest weights on the currency.
"Poor economic data last week and geopolitical concerns are also undermining the dollar," Robson added.
The euro's move higher against the greenback gathered pace after the German government said it was not worried about euro strength, adding that there was no reason to consider taking measures to try to counter it.
This contrasted with a report in Monday's Financial Times that quoted a senior European Central Bank official as saying the decline in the dollar had been relatively sharp and the euro's performance over the next four to eight weeks could influence the outlook on interest rates.
The discovery of mad cow disease in the United States encouraged traders to shun the greenback. U.S. officials on Sunday expanded the recall of more than 10,000 pounds of beef to eight states and Guam.
Analysts said expectations that the U.S. Federal Reserve would keep interest rates on hold for some time continued to undermine the greenback.
"Once again the market is concerned about U.S. growth prospects. We had weak durable goods data, and then on Friday comments from (Dallas Federal Reserve Bank President Robert) McTeer that the U.S. is in no rush to hike rates," said Steven Saywell, currency strategist at Citibank.
(Additional reporting by John Parry) |
