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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (46691)	2/26/2004 8:35:58 AM
From: elmatador	Read Replies (3) \| Respond to of 74559

<<French Prime Minister Jean-Pierre Raffarin joined German Chancellor Gerhard Schroeder in calling for the European Central Bank to reduce interest rates.>> Parole uis working! Dollar Climbs Against Euro, Yen; Germany, France Seek Rate Cut Feb. 26 (Bloomberg) -- The dollar rallied against the euro in London after French Prime Minister Jean-Pierre Raffarin joined German Chancellor Gerhard Schroeder in calling for the European Central Bank to reduce interest rates. ``Political pressure has been on the ECB,'' said Shahab Jalinoos, a currency strategist in London at ABN Amro Holding NV. ``European policy may change to be more accommodative.'' The dollar also climbed to the highest this year against the yen on speculation Japan will add to record sales of its currency to protect an economic recovery that produced the strongest growth in more than a decade last quarter. Against the euro, the U.S. currency strengthened to $1.2420 per euro at 11:29 a.m. in London from $1.2502 late in New York yesterday, according to EBS prices. The euro has climbed 16 percent versus the euro in the past year. Compared with the yen, the dollar appreciated to 109.69 from 108.99. ``In the very short term, the dollar is going to get a bit stronger,'' Paul Chertkow, a currency strategist at the Bank of Tokyo Mitsubishi Ltd. in London, said in an interview. The U.S. currency advanced against the British pound, Swiss franc and South African rand. Gold prices declined. Schroeder, in his second comment on the currency in two days, said in an interview with the Financial Times that the euro's level versus the dollar is ``not satisfactory.'' Raffarin said the speed and extent of the euro's gain is ``a concern.'' `Political Forces' The dollar, which in 2003 had its worst year against the euro since the common currency made its debut in 1999, has climbed 2 percent in the past five days on concern that European officials will seek to thwart gains beyond $1.30. It reached a record high of $1.2930 on Feb. 18. ``The euro-dollar exchange rate and the acceleration, extent and brutality of its movement isn't a good situation for the U.S. or for Europe,'' Raffarin told reporters in Paris. German business confidence fell in February for the first time in 10 months, the Ifo institute said on Tuesday. Optimism among Italian and Belgian executives has also waned, industry surveys showed this week. The stronger euro crimps profit from dollar-based sales when translated back into euros. Volkswagen AG said last week it will reduce its dividend for the first time in 11 years as earnings fell 60 percent, partly because of the dollar's drop. ``If you get beyond $1.30 it will be very difficult for the ECB,'' said Simon Derrick, head of currency strategy in London at Bank of New York. ``You have huge political forces'' exerting pressure for a weaker currency, he said. Meeting With Bush Schroeder, who is traveling in the U.S., will discuss the dollar's decline with U.S. President George W. Bush tomorrow in Washington, said a German official. ECB spokesman Jukka Ahonen declined to comment on Schroeder's remarks. The ECB's benchmark rate is 2 percent, twice the level of the Federal Reserve's target rate. The ECB last cut its rate in June, by half a percentage point. Unlike the Bank of Japan, the ECB hasn't tried to steer the foreign exchange market by buying or selling euros since 2000 when it purchased the currency. ``Europe signed up to the fact that the dollar has to weaken, but it hasn't been an equitable weakening,'' said Matthew Cobon, who helps manage about $70 billion in currencies at Deutsche Asset Management in London. In the past year, the euro has gained 16 percent against the dollar, more than twice the pace of the yen's appreciation. In Japan, Finance Minister Sadakazu Tanigaki said the government is ready to take ``appropriate action'' to prevent the yen's two-year rally from quashing the economy's revival after three recessions in 12 years. ``There is even at these higher dollar levels some action by the Ministry of Finance,'' said Uwe Parpart, senior market strategist in Hong Kong at Bank of America Corp. BOJ Tactics The Bank of Japan sold yen at least once this week, said traders who deal with the BOJ and asked not to be identified. The central bank sold a record 7.15 trillion yen ($65.5 billion) in the four weeks through Jan. 28. The Ministry of Finance will release February sales figures tomorrow. ``We wouldn't put it past the BOJ to give the yen a nudge in the right direction,'' Kamal Sharma, a currency strategist at Dresdner Kleinwort Wasserstein in London, said in an interview. ``They're going with the momentum.'' The Nikkei 225 Stock Average rose 1.5 percent today, increasing its 12-month gain to 29 percent. Overseas investors were net buyers of Japanese stocks for a sixth week in seven this year, the government said today. Japanese retail sales had their biggest gain in almost seven years in January, rising a seasonally adjusted 4.5 percent from December, the trade ministry said in Tokyo. Consumer spending accounted for a quarter of Japan's 7 percent annual pace of economic growth last quarter, the fastest in 13 years. To contact the reporters on this story: Taizo Hirose in Tokyo at hirose2@bloomberg.net Yumi Kuramitsu in Hong Kong at ykuramitsu@bloomberg.net To contact the editor of this story: Walter Krumholz at wkrumholz@bloomberg.net Last Updated: February 26, 2004 06:50 EST