Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: TechTrader42 who wrote (37586)	7/2/2002 1:58:53 PM
From: stockman_scott	Respond to of 52237

Dollar's Resilience Despite Weak Stocks Dubbed Temporary By: Grainne McCarthy, Of DOW JONES NEWSWIRES Tuesday July 2, 1:46 pm Eastern Time NEW YORK -(Dow Jones)- In the face of another major selloff in U.S. stocks over the past two days, perhaps the most surprising development has been the relative resilience of the dollar, with the currency edging higher against its major rivals. Since their peaks on Friday of $0.9990 and Y118.40, the euro and yen have each lost about 1.5% and 1.3% respectively against the dollar, while the U.S. currency has also made inroads against the Swiss franc and sterling. The modest rally - coming on the heels of steep losses incurred last week - has raised the question of whether the dollar is undergoing a correction, or indeed whether the growing number of economists forecasting a steady weakening in the dollar over the course of this year might have gotten it wrong. The answer is probably a combination of the two. The dollar might indeed be experiencing a short-term correction, but most analysts view this as nothing more than a temporary burst of relief before the currency resumes its downward trend. "Just in the short term, the potential for a somewhat deeper correction persists, the immediate threat to parity is somewhat diminished," said Robert Lynch, a currency strategist at BNP Paribas in New York . "But parity is still very much on the cards." In fact, currency analysts, if anything, appear more and more convinced that the euro could actually hit parity within a month. The single currency came within shouting distance of parity on Friday, riding on a wave of aversion to dollar assets in the wake of last weeks' revelations of accounting irregularities at WorldCom Inc. (NasdaqNM: WCOM - News) and Xerox Corp. (NYSE: XRX - News) The scandals helped confirm fears that the suspicions hanging over much of Corporate America were justified, in the process stoking speculation that foreign investors would be much less inclined to buy U.S. assets. Fed's Stance Not Helping This has been a key concern for the dollar, particular as overseas investors have been the main financiers of the U.S. current account deficit over the past few years, which is now at around 4.3% of gross domestic product and widening. The dollar's appeal has also been tarnished by a sense that the Federal Reserve, concerned about the sustainability of the U.S. economic rebound and perhaps also about sliding equity prices, won't begin to raise interest rates until late this year or early next year. With investors preferring to park their funds in higher-yielding currencies, the Fed's stance contributes only another excuse to sell the dollar. With these factors still very much lurking behind the dollar's outlook, analysts reckon its reprieve early this week is principally a result of investors taking profits on their recent hefty gains. "The real worries are that although the dollar has weakened quite considerably over the last three months, there might still be some bad news coming through from the U.S. ," said Mansoor Mohi-uddin, chief currency strategist at UBS Warburg in London . Backing up Mohi-uddin's more pessimistic outlook for the currency, UBS on Tuesday raised its forecasts for the euro aggressively. The bank now predicts the single currency hitting the elusive bar of parity within a month rising to $ 1.02 within three months and to $1.15 in a year's time. The bank cited weak asset prices, the current account deficit and uncertainty about U.S. policy on the dollar as key factors that could push the greenback into a protracted bear market. Euro Retreats Shallow For the shorter term, it's not unusual to see the dollar taking back some ground from its key counterparts. Indeed, in the course of the euro's steady climb towards parity, many analysts were struck by the fact that the euro wasn't falling back much before attempting to climb higher. Although the common currency has retreated a bit now, market participants continue to believe the step back will be short-lived. "The pattern of euro's corrections have been shallow," said Lynch. "I'm not willing to say that pattern is going to break until I see it break." Indeed, on Tuesday the dollar's gains were already starting to look fragile, with the currency losing some ground in the New York after noon am id persistent weakness on the stock market. Robert Sinche, chief currency strategist at Citibank, said that the euro's retracement should offer better buying opportunities for long euro positions. " We are not yet willing to suggest a solid bottom for the dollar," he said. On Tuesday the euro was hurt specifically by some domestic factors, including a report in the French newspaper Le Monde alleging Vivendi Unversal S.A. tried to overstate its 2001 profit by 1.5 billion euros. The report raised fears that accounting irregularities and large scandals might not be limited to the U.S. Against the yen, the dollar has also been supported a bit by the fear of further Bank of Japan intervention, after the BOJ stepped in to the market last Friday for the seventh time since late May. Early afternoon Tuesday, the dollar was trading at Y120.12, up from Y119.87 late Monday in New York but off its session high around Y120.75. The euro was changing hands at $0.9821, down from $0.9898 late Monday in New York but also much stronger than its intraday low of $0.9803. Against the Swiss franc, the dollar was at CHF1.4921 up from CHF1.4841 late Monday. Sterling was at $ 1.5282, down from $1.5316.