FOREX-Dollar strong in Asia as bears capitulate
Sun, Aug 10 2008, 23:09 GMT
afxnews.com
SYDNEY, Aug 11 (Reuters) - The U.S. dollar was at multi-month highs against a range of currencies on Monday after investors were forced to cut back on one of the favoured trades of the year -- short dollars and long commodities.
In early Asian trading the euro was hovering around $1.4950 <EUR=>, its lowest since late February and down from $1.5006 late in New York on Friday.
The single currency had collapsed over 2 percent on Friday in its biggest daily move since 2000 as investors abandoned short positions in the U.S. dollar, while bailing out of commodity trades, in part on a view that other major economies were joining the United States in a slowdown.
"The currency and commodity moves look like a massive pain trade," said Matthew Johnson, a senior economist at broker ICAP. "All those short U.S. dollar, long commodities gains of the past six months are being squeezed away."
The CRB commodities index <.CRB> shed 3 percent on Friday while oil dropped below $115.00 a barrel. Oil <0#CL;> edged up above $116.00 on Monday as clashes between Russia and Georgia stirred some safe-haven flows.
Still, the dollar held up at 110.24 yen <JPY=>, having earlier hit its highest reading for the year at 110.36.
"Markets are presently undergoing a major reconfiguration as investors continue to adjust to signs that the European economy has hit the wall, squeezed by a combination of surging energy prices and tight monetary conditions, overlaid with a credit crunch for good measure," said Darren Gibbs, a senior economist at Deutsche Bank.
That had led the market to price in rate cuts for the euro zone, and policy easing in Japan, Australia and New Zealand for good measure.
"Predictions of a recovery in the dollar are now looking good," added Gibbs, noting the dollar index looked to have broken out of a seven-year downtrend.
The dollar index <.DXY> which measures it against a basket of currencies was up at five-month highs of 76.047, having climbed from 73.42 in just a week.
(Reporting by Wayne Cole; Editing by James Thornhill) |
