CURRENCIES: Dollar Gains Against Euro As Equities Slip
By William L. Watts
The U.S. dollar gained ground versus the euro and high-yielding commodity
currencies as equity markets weakened around the world, signaling a retreat in
appetite for risk among investors.
The European single currency was again unable to extend a push above the
psychologically important $1.50 level versus the U.S. unit, slipping back to
trade at $1.4865 versus the greenback in recent action, down from $1.4972 in
North American trade late Monday.
Gains by equities and commodities have tended to provide support for the euro
and commodity-oriented currencies versus the dollar as investors show increased
appetite for risk. The dollar, conversely, has rallied when risk appetite wanes.
Asian equities finished mostly lower. European stocks were weaker and U.S.
stock index futures pointed toward a lower open for U.S. stocks after a push
higher on Monday saw the S&P 500 close above the 1,100 level for the first time
this year.
The euro made its latest foray above $1.50 in late trade Monday, effectively
shrugging off reassurances by U.S. Federal Reserve Chairman Ben Bernanke that
the central bank was attentive to the implications of "changes in the value of
the dollar."
Those remarks had prompted a temporary spike higher by the U.S. unit on
Monday, but the greenback soon lost altitude, with the dollar index (DXY), a
measure of the greenback against a basket of major rivals, falling to a 15-month
low.
ECB President Jean-Claude Trichet, in an interview with French newspaper Le
Monde published on Tuesday, welcomed Bernanke's remarks and said the euro was
never intended to be a reserve currency.
Those comments helped extend losses by the single currency, said Jane Foley,
research director at Forex.com.
Trichet has repeatedly endorsed remarks by U.S. officials in favor of a
stronger dollar. Euro-zone officials have repeatedly complained about the
weakness of the U.S. currency. A stronger euro makes the region's exports more
expensive to buyers outside the single-currency region.
Foley said the timing of Trichet's remarks were interesting. The market has
given up on ideas that U.S. President Barack Obama's trip to China will bring a
quick revaluation of the Chinese yuan.
The Chinese currency's effective peg to the dollar means the euro and the
Japanese yen have had to bear the brunt of the dollar's fall, she said.
Failure by China to relax the peg means the euro will likely move back toward
its all-time highs, she said, leaving the ECB "little option but to increase
jawboning to try to stem the pace of the euro's gains versus the dollar," she
said.
Obama, in a news conference in Beijing on Tuesday, said he welcomed China's
past commitment to "move toward a more market-oriented exchange rate over time,"
but didn't explicitly call for Beijing to allow the yuan to appreciate.
The British pound failed to hold early gains versus the dollar, slipping 0.3%
to change hands at $1.6774. The euro remained 0.4% lower versus sterling to
change hands at 88.61 pence.
The U.K. Office for National Statistics on Tuesday said annual consumer price
inflation came in at 1.5% in October, accelerating from 1.1% in September. That
marked the first rise in the annual pace in eight months, but was in line with
expectations.
The dollar rose slightly versus the Japanese currency to trade at 89.29 yen,
up from 89.06 yen in late North American trading Monday.
The greenback received support in Asian trade after minutes from the Reserve
Bank of Australia's Nov. 3 policy meeting weighed on the Australian dollar. The
RBA said the pace of its interest-rate hikes was "an open question," which
pushed the country's currency down against major rivals, including the U.S.
dollar.
The Australian dollar traded at 92.65 U.S. cents, down 1.3%.
(END) Dow Jones Newswires
11-17-090740ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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