Forex - Dollar remains weak after G20 meeting showed US unconcerned by falls
Monday, November 22, 2004 9:47:40 AM
afxpress.com
LONDON (AFX) - The dollar remained weak against major currencies after the weekend's meeting of G20 ministers confirmed that the US is little concerned by the fall in its currency and is unlikely to intervene to support it
Comments from Federal Reserve chairman Alan Greenspan suggesting that a further depreciation in the US currency may be necessary to bring down the US current account deficit, sent the dollar plummeting on Friday. The US currency fell to new record lows against the euro and year-lows against the yen last week, and with little on the economic calendar today, the bearish sentiment is expected to remain intact
"Following Greenspan's comments on Friday ... and the message from the G20 meeting that no support for the dollar can be expected from the US authorities, the recent currency trends are likely to continue in the near-term," Dresdner Kleinwort Wasserstein analysts said
The dollar's sharp falls leave the market nervous, however, about the potential for intervention by the European Central Bank or the Bank of Japan to prop up the dollar as their economies suffer from weaker exports
"The political pressure for intervention is already building, as is the economic imperative," said Daragh Maher, currency strategist at CALYON
He added that the dollar's recent sharp move downwards may lead to fears of the sell-off generating "excessive momentum"
This week will see the release of business confidence indicators from Belgium and Italy, as well as the key German Ifo index on Thursday, which should gauge the level of concern about the higher euro and rising oil prices
Elsewhere, the pound weakened, continuing last week's falls after a raft of economic data suggesting that higher borrowing costs are taking their toll on the economy, particularly on the housing market, cementing expectations that interest rates will not rise any further
A speech this morning by the Bank of England's deputy governor Andrew Large may give more weight to this view. |
