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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: gregor_us who wrote (195)	2/18/2004 3:08:06 PM
From: ild	Read Replies (1) \| Respond to of 116555

Dollar Surges on Signs Japan, Europe Want to Curb Currencies Feb. 18 (Bloomberg) -- The dollar rose against 15 major currencies on speculation the Bank of Japan will sell yen to protect an economic rebound and after French President Jacques Chirac suggested the euro shouldn't be allowed to rise too fast. Finance Minister Sadakazu Tanigaki said Japan will counter ``speculative'' and ``excessive'' moves in the exchange rate, with the yen close to a three-year high against the dollar. Chirac said ``greater stability'' in the euro is needed for ``sustained'' economic growth in the 12-nation euro region. ``The market doesn't appear ready to push the dollar to new lows'' today, ``despite all the negatives that are weighing'' on the currency, said Tim Mazanec, senior currency strategist at Investors Bank & Trust in Boston, which is custodian for $1.1 trillion of assets. Against the yen, the dollar rose to 106.90 at 2:22 p.m. in New York from 105.66 late yesterday. It reached 107.14 yen for the biggest one-day gain since March 19, 2003. The dollar rose to $1.2706 per euro from $1.2842, after the euro reached a record $1.2930 earlier in European trade. The dollar also rebounded against the British pound and Australian dollar. Only the Taiwan dollar among 16 major currencies avoided falling against the dollar. Japan sold yen and bought dollars in Asian trading today, said traders who deal with the bank. The BOJ also may have sold in New York trading, said Enrico Caruso, chief currency trader at hedge fund Tempest Asset Management in Irvine, California. ``The BOJ continues to remain in there stifling the yen's appreciation,'' said David Durrant, chief currency strategist at Bank Julius Baer & Co. in New York. Japanese Expansion Japan's economy grew at a 7 percent annual rate in the three months ended Dec. 31, the Cabinet Office said, compared with a 4.7 percent median forecast in a Bloomberg News survey and 4 percent expansion for the U.S. last quarter. The central bank sold a record 7.15 trillion yen ($67.7 billion) in the four weeks through Jan. 28. The government spent 20.4 trillion yen last year, five times the previous year's sum. Chirac's remarks, made at the opening of a summit meeting in Berlin with German Chancellor Gerhard Schroeder and British Prime Minister Tony Blair, helped spur a rally in the dollar. The euro earlier rose to a record after European Central Bank council member Guy Quaden said policy makers have no ``pain threshold'' at which they may try to stem the currency's advance. `Sizeable Move' ``After such a sizeable move, people are reluctant to enter new long positions just below $1.30,'' said Greg Anderson, senior foreign-exchange strategist at ABN Amro Inc. in Chicago. ``It will take a few days and a few trips above $1.29 before the market feels comfortable attacking $1.30.'' Since the start of 2002, the euro has risen 44 percent against the dollar. Gold prices fell. Contracts for gold for immediate delivery fell $3.70 to $412.30 per ounce in New York. Gold reached a 15- year high of $430.40 on Jan. 6. Hans-Werner Sinn, head of the Ifo economic institute in Munich, said the euro appreciation threatens economic growth in Europe. ``We have to be vigilant not to let the euro rise above $1.30,'' Sinn told reporters at a press conference. ``According to our company surveys, this is a kind of a pain threshold.'' The euro region's economic growth slowed in the fourth quarter as the 12-nation common currency's gains hurt exports. Volkswagen AG said today fourth-quarter profit fell 60 percent as the euro's advance eroded revenue. Dollar's Long Descent Today's gains aside, demand for the dollar has waned in the last year as the U.S. Federal Reserve has kept its target rate at 1 percent, a four-decade low. Trichet on Monday said the ECB's benchmark rate of 2 percent, twice the Fed's target, is ``historically low.'' Australia's central bank deputy chief said the country's benchmark rate ought to be somewhere between 5 percent and 6.26 percent. The U.S. Dollar Index, which tracks the dollar's value against a basket of six currencies, is 85.82 cents, close to the lowest since November 1995. The basket comprises the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, representing key trading partners of the U.S. quote.bloomberg.com