CURRENCIES: Dollar Gains On Euro In 'soggy' Trade
By Deborah Levine
The dollar gained ground versus the euro Thursday, buoyed by a weaker tone
in equity markets that tends to signal risk aversion but trapped in a tight
trading range.
The euro slipped to $1.4870, down from $1.4956 in late North American trading
on Wednesday.
The currency pair remains trapped in a stalemate between support at $1.4800
and resistance at $1.5050, wrote strategists at UniCredit MIB in a research
note, with "only bullish U.S. data and equity possible triggers for a break-out
to the upside."
The dollar index (DXY), a measure of the U.S. currency against a trade-
weighted basket of rivals, rose to 75.459 from 75.108 late Wednesday.
The dollar slipped to 88.80 Japanese yen, down from 89.45 yen late Wednesday.
The dollar and the Japanese yen were both supported versus other rivals as
U.S. stocks opened lower, following weakness in European and Asian equities.
Declines by oil and gold reinforced support for the low-yielding currencies,
strategists said.
The dollar and the yen have tended to hold an inverse relationship to moves by
equities and commodities in the wake of the global financial crisis.
"After yesterday's consolidation, markets have reverted to selling risk today
amid much talk of early position unwinding for year-end," said currency
strategists at RBC Capital Markets.
As the end of the year approaches, investors and traders tend to unwind short
positions and book profits on good bets made during the year, analysts said.
That activity tends to temporarily support assets considered less risky,
including the U.S. dollar.
It's tough to get excited about any gains in the dollar index until it closes
above key technical barriers around 76, RBC analyst David Watt said.
The dollar pared some of its gains after the U.S. Labor Department said 505,
000 Americans filed initial claims for unemployment benefits in the latest week,
flat from the prior week and a level several analysts say is still too high to
indicate payrolls numbers will turn positive in the near term.
Euro bulls, however, remain sensitive to recent efforts by the European
Central Bank to talk the single currency down to support export-based economies,
UniCredit analysts said. Meanwhile, overall foreign-exchange trading conditions
remain "very soggy," they said, with range-trading likely to prevail amid a
light economic calendar.
The Bank of Japan will conclude its two-day policy meeting Friday, and is
widely expected to leave its overnight call rate target at 0.1%.
Some analysts also say the yen is poised to benefit from China's eventual
revaluation of the yuan, which is now kept artificially low against the dollar.
"We continue to believe that yen could strengthen further, aided by both risk
aversion flows and the nagging issue of yuan revaluation," said Boris
Schlossberg, director of currency research at GFT.
"Unless the dollar strengthens materially, providing some relief for export-
led Asian economies and the Europeans. we think the yuan revalue story will
persist and the Chinese will have to respond to world pressure even if the move
may be largely ceremonial rather than economic," he wrote in emailed comments.
On Wednesday, the dollar headed lower versus the euro and other major
counterparts, falling for the third session in four, as a surprisingly weak
report on U.S. housing starts and comments from a Federal Reserve policy maker
solidified expectations that interest rates would remain low for some time.
The British pound ignored a raft of data on Thursday, including a rise in
October retail sales data. The pound slipped to $1.6630, down from $1.6736.
(END) Dow Jones Newswires
11-19-090952ET
Copyright (c) 2009 Dow Jones & Company, Inc.
|