Top Financial News
Fri, 26 Mar 1999, 5:11pm EST
Dollar Rises vs Major Currencies; Investors Seek Haven Amid Balkan Crisis
Dollar Rises as Investors Seek Safety Amid Bombing (Update1)
(Updates rates.)
New York, March 26 (Bloomberg) -- The dollar rallied against
the euro and yen amid a third day of NATO air strikes against
Yugoslavia, driving investors to the safety of the world's
reserve currency.
The dollar rose to its strongest level against the euro and
had its best day against the yen in more than five weeks.
''We expect the euro to fall toward $1.05 over the next week
due to the ongoing war on the fringe of Europe,'' said James
McKay, global market strategist at Commonwealth Bank of Australia
in London.
In late afternoon trading, the dollar advanced to $1.0770
per euro from $1.0839 yesterday in New York. Earlier, it gained
to $1.0713 per euro, the single currency's lowest level since its
Jan. 1 introduction. The dollar rose to 120.25 yen from 118.21.
Heightening tensions, Russia expelled NATO's envoy in Moscow
and froze relations with the western military group in protest,
making some investors nervous about European financial assets.
The dollar tends to rise in times of international turmoil.
Russia's Communist-dominated lower house of parliament may
vote tomorrow to send arms to Yugoslavia. Still, the government
isn't compelled to act should such a measure pass, and President
Boris Yeltsin and Prime Minister Yevgeny Primakov have said they
are opposed to it.
Some investors aren't alarmed. ''I don't see this leading to
any major international conflict,'' said Paul O'Brien, who
manages $5 billion in assets at Morgan Stanley Dean Witter
Investment Management in West Conshohocken, Pennsylvania. ''It
shouldn't have any macro-economic or political impact on Europe''
or any lasting effect on the euro. (What a clown)
The dollar also rose to a seven-month high against the Swiss
franc and climbed versus the Greek drachma. For the week, the
dollar gained 2.7 percent against the yen and 1.2 percent against
the euro.
Haven Buying
U.K. Defense Secretary George Robertson said North Atlantic
Treaty Organization forces launched new air attacks today on
Yugoslav military positions.
''It's dollar strength across the board,'' said J.P.
Neergaard, foreign exchange manager at Den Danske Bank. ''It's a
delayed reaction of people going into dollars. This is what we've
been looking for for awhile.''
The NATO bombing across the republics of Serbia and
Montenegro is the largest allied military operation in Europe
since World War II. The air raids follow a sustained Yugoslav
military assault on Kosovo, a Serbian province with an ethnic
Albanian majority that is striving for greater autonomy.
The dollar's rise accelerated after Russian Foreign Minister
Igor Ivanov said the country is ''freezing all contacts with
NATO.''
''That's the straw that broke the camels back,'' said Dan
Scherman, who helps manage $5.5 billion in assets at MFS Asset
Management in Boston. ''It could clearly be an irritant but I'm
not sure this will sway NATO forces.''
Yen Selling?
Also lifting the dollar against the yen was speculation the
Japanese government may sell its currency to curb a 3 percent
gain since March 3. The stronger yen hurt exports, the one bright
spot in the recession-wracked economy.
Almost daily this week, senior finance officials have said a
strong yen is undesirable. The currency's gains came as Japanese
stocks rallied and companies brought home overseas earnings to
reflect gains ahead of the fiscal year-end on March 31.
''Japanese officials are concerned about the knock-on effect
that yen strength may have on any incipient recovery,'' said
Keith Edmonds, chief currency analyst at IBJ International.
''They're relatively content with the yen in a range between 115
yen and 120 yen per dollar.''
Elsewhere, the British pound was little changed at $1.6224
from $1.6234 yesterday. The U.S. currency rose to 1.4793 Swiss
francs from 1.4707 and to 1.5137 Canadian dollars from 1.5067.
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