Is the Euro being undermined by the US FED?
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Dollar gains ground vs mark and yen in morning Europe
LONDON, Oct 26 (Reuters) - The dollar edged higher against the mark and yen in Europe on Monday, though traders noted no particular change in sentiment and added that it had not broken out of its recent ranges.
Yen sentiment was slightly dampened overnight by news that Moody's Investors Service had put the financial strength ratings of eight Japanese life insurance companies under review for a possible downgrade.
Dollar/yen was just off its session high and at 119.14/20 at 0820 GMT after trading in a one-yen range overnight, compared with 117.80/90 in late Europe on Friday.
''The Moody's news wasn't that startling and it hasn't done all that much for dollar/yen... The dollar doesn't seem to have very strong tendencies either way today,'' said one trader at a Japanese bank in London.
The Moody's news follows the rating agency's announcement on Friday that it was putting four major Japanese banks under review for a possible downgrade.
Adding to the gloom was the Bank of Japan branch managers' meeting. The central bank's branches said all regions in Japan were mired in recession and that it was hard to predict when the economy would start to recover.
Meanwhile, the dollar was on a firm footing against the mark, buoyed by comments from a European Union summit over the weekend at which European leaders said conditions were right for an interest rate cut in the 11 countries planning to join economic and monetary union.
The dollar was at 1.6510/19 marks, just off its session high and up from 1.6370/73 seen in late Europe on Friday.
But analysts said that despite the mark's softening, the EU leaders' calls for lower interest rates had done little to change their views regarding monetary policy in Europe.
Many were of the opinion the ''core'' EMU nations would not cut interest rates until control of monetary policy was handed over to the European Central Bank in January.
''I'm surprised the dollar has risen this much on these comments (from the EU summit). It's a bit naive,'' said Julian Jessop, chief European economist at Nikko Europe. ''We are talking about an independent central bank which is not going to be swayed by what the politicians say.''
Italian Prime Minister-elect Massimo D'Alema said all 15 EU heads of government agreed at the summit that Germany should lead a concerted move to cut European interest rates.
While there were few expectations the German Bundesbank would oblige, analysts said D'Alema's comment was likely to prevent a rally in the mark in the near future.
''The politicians are coming out in favour of it (a European rate cut) in spite of their rhetoric about the importance of not compromising the independence of the ECB,'' said Tim Fox, chief economist at Standard Chartered.
''The political pressure is there, and that should put a lid on the upside for the mark.''
Meanwhile, the British pound was slightly higher against the mark but softer against the generally firmer dollar.
This was mainly a result of the rise in dollar/mark, and the tone in sterling was subdued amid expectations that the Bank of England would cut interest rates in the near future.
The Sunday Telegraph reported that Barclays Capital would reveal, in a quarterly report due out on Monday, that it expects the British economy to go into recession in 1999.
Sterling/mark was at 2.7730/40 against 2.7683/88 in late European trade on Friday, while sterling/dollar was at $1.6803/13 against
$1.6898/08.
Commnet: If Europe {Germany & Britian} are having artificialy high rates, and Japan in a confirmed recession/depression, is it not possible that capital will seek a higher growth rate at a lower inflation rate. And thus migrate to USA/CDN and will thus raise the USD relative to other currencies. And thus gold will get pushed downwards? Was the most recent actions of the US FED rate lowering done deliberately to break the Japan carry rate, and set up a isolated system of protectionism of the US financials?
Buffets' buying LTCM? Whatch liquidity this week. It isn't going to increase. So the price of gold will fall further. |
