Dollar slides to new lows across the board
By Jennifer Hughes in New York and Steve Johnson in London
Published: October 20 2004 11:50 | Last updated: October 20 2004 14:34
The dollar slid to new multi-month lows across the board on Wednesday, with the euro breaking above $1.26 for the first time since February, as the greenback’s recent weakening picked up pace.
There was little in the way of fresh news to weigh on the dollar, instead observers said it was momentum accounts - funds who look for strong trends before committing cash - who were getting behind the greenback’s recent weakness after it broke out of its well-worn trading range against the euro of between $1.18 to $1.25 since March.
Strategists focusing on fundamental economics added that the US dollar continued to be hurt by a combination of soft economic data, high oil prices, the mounting twin deficits and uncertainty prior to the presidential election.
In early US trade, the euro reached a high $1.2613. Traders said short-term investors focusing on technical levels in the Swiss franc had led the move. The dollar slid below SFr1.22 against the franc, an eight-month trough.
Sterling managed a two-week high on the dollar’s weakness, breaking above $1.81 even as the pound reached a fresh nine-month low against the euro in European morning trade as Bank of England minutes were judged to be dovish.
The minutes of the monetary policy committee’s October meeting showed the nine-strong committee voted unanimously to hold rates at 4.75 per cent, as expected. However some took the surrounding comments as a sign the MPC would hold rates in November as well, thus withholding yield support from sterling.
Daragh Maher, senior FX strategist at Calyon, argued that most of the discussion was dominated by dovish arguments, such as consumer price inflation falling further below target and signs of slowing in the housing market.
“Furthermore, the minutes chose to point out that the ‘labour market, although tight, had not tightened further’, a spin that suggests a dove was at the keyboard when the minutes were typed up,” added Mr Maher.
“For now, the minutes must surely have quelled any lingering hopes among market hawks for a hike at the November meeting, and the rapid rise in sterling/dollar over the last two days looks rather ill-considered on the basis of both the rhetoric and the data.”
Ian Gunner, currencies strategist at Mellon Financial, added: “the MPC will likely preside over steady interest rates until more clarity appears and this may not happen for some time yet.“ |
