Jay the USD that I bought at 1.23 is still there. I didn't budged!
Dollar hits 8-week low versus euro on weak US data
By Steve Johnson in London
Published: May 27 2004 11:31 | Last Updated: May 27 2004 17:28
The dollar's recent slide accelerated on Thursday as soft US economic data intensified fears that the market had factored in US interest rates rising too far and too fast.
Even a sharp pullback in oil prices, with Nymex crude sliding $1.28 to $39.42, failed to reassure traders that the US economy will grow fast enough to justify rates doubling to 2 per cent by December. The greenback also crashed through a number of technical levels, triggering a barrage of stop-loss orders and sending the dollar spinning lower still.
"The dollar is looking very ropey," said David Bloom, currency analyst at HSBC. "The trend of strengthening that the market was extrapolating, of 5 per cent growth ad infinitum, is maybe just too powerful."
The dollar's rally since February was predicated on rampant economic growth leading to rapid monetary tightening, leading speculators to liquidate dollar-funded carry trades.
Concerns that high oil prices could sabotage this rosy picture have weighed of late. On Thursday this fear was compounding by soft economic data, with fourth quarter US GDP revised upwards less than expected, to 4.4 per cent, while weekly jobless claims came in at a disappointing 344,000. After weak durable goods and homes sales numbers on Wednesday, the market rowed back from an assumption that US rates will reach 2 per cent by the year-end.
"The dollar continues to be undermined by uncertainties over the extent of monetary tightening that will be needed in the second half of the year to slow economic activity in the US," said Derek Halpenny, currency economist at Bank of Tokyo-Mitsubishi, who also alluded to fears of a fresh al-Qaeda strike in the US.
Consequently the dollar slumped 1.4 per cent against the euro to an eight-week low of $1.2266 as a support level of $1.2180 was comprehensively breached, 2.2 per cent against the Swiss franc to a three-month low of SFr1.2460 and 1.1 per cent versus the yen to a two-week low of Y110.80.
The greenback also lost 1.5 per cent against sterling to chalk up a fresh six-week low of $1.8372, with three-week lows against the dollars of both New Zealand, where the likelihood of a further rate rise to 5.75 per cent next month remains strong, and Australia, to $0.6351 and $0.7177 respectively.
The Swiss franc was a key beneficiary, rising 0.8 per cent against the euro to an 11-month high of SFr1.5270 and 1.2 per cent versus the yen to Y88.99, as its safe haven status proved popular.
Sterling was aided by the CBI monthly trends survey showing manufacturing orders at their highest level since February 1998 and exports at their best for eight years. With the Nationwide survey indicating that house price inflation may be accelerating, Robert Sinche, head of currency strategy at Citigroup, said the chances of a June interest rate hike had "increased significantly". |
