CURRENCIES: Dollar Falls 1%, Euro Back Above $1.50
By Nick Godt
The dollar fell more than 1% versus major counterparts Wednesday, lifting
the euro back above the key $1.50 level, as economic sentiment was helped by
overall upbeat U.S. economic data a day after the U.S. Federal Reserve signaled
few qualms about the U.S. unit's decline.
The dollar index (DXY), a measure of the U.S. currency against a trade-
weighted basket of major rivals, recently fell 1.1% to 74.252.
The euro traded at $1.5137, up from $1.4962 in North American trade late
Tuesday.
The dollar also fell to 87.35 yen versus the Japanese currency, down from
88.49 yen. The dollar notched a 10-month low versus the Japanese unit at 87.37
yen, according to FactSet.
"We continue to believe that the U.S. dollar could fall another 5% to 7% over
the next few months," said Kathy Lien, director of currency research at Global
Forex Trading, in emailed remarks.
The broadly weaker greenback also broke parity with the Swiss franc for the
first time since July 2008, dipping to a low of 0.9959 franc. In recent action,
the dollar fetched 0.9961 francs, a loss of 1.2% on the day.
Upbeat economic news and expectations that the Fed will keep interest rates at
ultralow levels have helped send the dollar to 14-month lows.
When upbeat news encourages risk, traders borrow dollars nearly for free to
invest in higher-yielding currencies or assets, such as stocks and commodities,
engaging in the so-called carry trade.
"The big surprise this morning was the sharp decline in jobless claims," GFT's
Lien said.
The U.S. Labor Department reported that weekly jobless claims had fallen under
500,000 for the first time in nearly a year. Separately, consumer spending rose
0.6% in October, as expected, while real disposable income rose 0.2%, more than
the 0.1% gain expected.
Also, a gauge of U.S. consumer sentiment was revised to a higher-than-expected
level, while sales of new homes jumped in October.
On a less upbeat note, orders for durable goods fell 0.6%, and excluding
transportation they fell 1.3%. Economists surveyed by MarketWatch had expected
orders to rise 0.5% overall, and a gain of 0.4% excluding transportation.
Aussie, Fed pressure
In Asian trade, upbeat economic remarks by the Reserve Bank of Australia's
deputy chief helped stoke risk appetite.
Remarks by Reserve Bank of Australia Deputy Gov. Ric Battellino contributed to
rising sentiment about global economic prospects, analysts said.
"With the economy having only recently entered a new upswing, it is reasonable
to assume that we will see this growth extended for a few more years yet,"
Battellino told an Australian housing conference, according to Dow Jones
Newswires.
That contributed to expectations that the RBA will lift rates again in
December, boosting the Australian dollar while also lifting overall global risk
appetite, analysts said, contributing to dollar weakness.
The Australian's comments followed the late-Tuesday release of the Fed's Nov.
3-4 meeting minutes, which "seemed to tacitly endorse dollar weakness as long as
it's orderly," said Daragh Maher, currency strategist at Calyon.
Minutes of that Federal Reserve's meeting also kept pressure on the U.S.
dollar, strategists said, because they reinforced expectations U.S. interest
rates will remain low for some time.
The Australian dollar rose 1.2% to trade at 93.15 U.S. cents. The U.S. unit
declined 0.8% versus the New Zealand dollar to trade at NZ$1.3657.
The British pound rose 0.9% to trade at $1.6721 versus the dollar.
Sterling had little lasting reaction to an expected upward revision to third-
quarter British gross-domestic-product data. GDP there shrank by 0.3% compared
with the previous quarter, falling 5.1% compared with the year-earlier period.
The Office for National Statistics had previously estimated a quarterly fall
of 0.4% and an annual decline of 5.2%.
The U.S. dollar's weakness helped fuel a rise in gold futures, which advanced
in electronic trading on Globex. The December contract tapped a record above $1,
187, buoyed by investment demand and a report that India might be buying more
gold from the International Monetary Fund.
Vietnam's currency took center stage in Asian trade as that country's central
bank said it would again devalue its currency.
Vietnam's central bank said Wednesday it will devalue the dong by 5.4%,
effective Thursday, resetting the dollar-exchange rate to 17,961 dong from its
current level of 17,034 dong.
The move -- Vietnam's third devaluation in two years -- is an apparent attempt
to protect its foreign reserves. The State Bank of Vietnam will also narrow the
trading band of the dollar against the dong to 3% from 5%.
(END) Dow Jones Newswires
11-25-091554ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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