WORLD FOREX: Euro's Decline Speeds On Deutsche Bank Downgrade
(to me it seems as an outright trade war between the US and the Europe - as the US must issue trillions in worthless debt the rating agencies are downgrading the EU and its leading institution – a strong dollar makes it easier to issue debt but does not generates working places and will not help pay the 1 trillion in mortgages that will reset with in 2010 to 2012 – the disdain of the US is obvious from the attitude of Lula toward the Secretary of State and also China responsiveness to US request – they just ignore the US those are my 2 cents)
By Bradley Davis
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The dollar rallied further against the euro Thursday as Moody's Investor Service, Inc., downgraded Deutsche Bank AG (DB), highlighting continuing fiscal concerns in the euro zone.
The euro fell to an intraday low against the dollar on the Moody's release after it had already dropped on lingering worries over Greek debt that were unsoothed by earlier comments by European Central Bank President Jean-Claude Trichet.
Investors will now look "at the remainder of the troubles facing the European banking sector," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J. "You've got to look at Deutsche Bank as being one of the most solid ones out there," among euro zone banks, Dolan said.
Around noon Thursday in New York, the euro was at $1.3567 from $1.3703 late Wednesday, according to EBS via CQG. The dollar was at Y89.02 from Y88.43, while the euro was at Y120.74 from Y121.17. The U.K. pound was at $1.5030 from $1.5092. The dollar was at CHF1.0786 from CHF1.0674.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.617 from 79.971.
Moody's announced Thursday it downgraded Deutsche Bank AG's long-term deposit and senior debt ratings to Aa3 from Aa1, and its bank financial strength rating to C+ from B, sending the euro from $1.3608 just before the announcement to its intraday low of $1.3552 just after the announcement.
Earlier, the euro came under pressure after better-than-expected U.S. jobs data contrasted with the fiscal struggles of the euro zone.
U.S. weekly claims for jobless benefits declined last week by more than expected, it was announced Thursday, and U.S. factory orders increased, though at a rate slower than economists had predicted.
European Central Bank President Jean-Claude Trichet on Thursday offered relatively little to investors wanting assurance on Greek debt in a question-and-answer session following the central bank's decision to leave key euro zone interest rates unchanged and to keep providing banks with generous liquidity.
The euro zone's struggles lead investors to the dollar, said Omer Esiner, senior market analyst at Travelex Global Business Payments in Washington, as the ECB will likely lag the U.S. when it comes to normalizing monetary policy and boosting key interest rates.
The U.S. data contrasted with continued investor worry on Thursday whether Greece could get its fiscal house in order after announcing on Wednesday additional belt-tightening measures, which Trichet called credible.
Though analysts said Trichet offered nothing new on Greece, an earlier announcement from the Greek government that its a 10-year bond was oversubscribed by investors could be undergirding the euro from steeper losses, said Stuart Bennett, senior currency strategist at Credit Agricole CIB in London.
"The problem is all it will take is some bad comment from Germany, France, the Greek government--whatever it might be" and the euro's decline will speed, Bennett said.
The bond attracted around EUR14.5 billion in bids and the books have closed, the head of the country's debt management agency said Thursday. The government aimed to raise EUR5 billion from the offering.
If successful, the bond offering would prove a major relief for the government and increases the likelihood that it can get through the year without needing to draw on financial help from the E.U. or the International Monetary Fund.
"Implementation, though, remains key," said Geoffrey Yu, currency strategist at UBS in London.
Meanwhile, the Bank of England earlier offered the pound some support after it also stood pat on key rates, while deciding against an expansion of the government's bond-buying program, known as quantitative easing.
By morning New York trading, the pound had given up its gains as the dollar rallied broadly.
The BOE's monetary policy committee voted against extending quantitative easing, beyond the existing GBP200 billion, as data pointed to continuing--if gradual--improvement in U.K. economic conditions, though BOE policy makers have emphasized that they could again restart the central bank's bond-buying program if the recovery begins to falter.
-By Bradley Davis, Dow Jones Newswires; 212-416-2654; bradley.davis@dowjones.com |
