Dollar Pummeled by Weak Stocks, Fed Talk
Enviado: 23/7/2003 19:07Dollar Pummeled by Weak Stocks, Fed Talk
Wednesday, July 23, 2003 1:40 p.m. ET
By Javier David
NEW YORK (Reuters) - The dollar fell broadly on Wednesday, undermined by falling U.S. stocks and renewed concerns about the health of the economy, underscored by remarks made by a senior U.S. Federal Reserve official.
The U.S. currency has risen for weeks against major rivals as expectations for a U.S. economic recovery have gathered steam and sent Wall Street stocks higher.
However, a lack of concrete evidence of any rebound has made markets restive and blunted the dollar's upward momentum from an extended period of weakness.
On a day when the greenback was already under pressure, traders were further unnerved by Fed Governor Ben Bernanke, who in a speech said the central bank could lower interest rates further to keep the recovery on track and ward off deflation -- a broad and pernicious fall in prices.
"It seems like every time an official starts mentioning the 'd-word' it seems to be a 'sell' signal for the dollar," said Michael Woolfolk, currency strategist at Bank of New York , referring to deflation.
"Every time we begin talking about the issue of cutting rates it seems to undermine the dollar," he added, indicating that in the absence of firm evidence of a recovery, the yield disparity between the U.S. and Europe was still a sore point for some traders.
As stocks declined after industry bellwethers Boeing Co. <BA.N> and AOL Time Warner <AOL.N> gave tepid earnings guidance, the euro soared as high as $1.1488 <EUR=> versus the dollar, a two-week high and up 1.30 percent on the day.
Market players are divided on the influence stocks have on the dollar's direction. But as Wall Street has become a barometer of future expectations about the economy, stock markets take the place of trading fodder for currency markets on days when there is little in the way of new economic data.
Against the Swiss franc, the dollar slid 1.20 percent on the day to stand near 1.3450 <CHF=>. Sterling recouped more than 3 cents from a three-month low reached against the U.S. currency this week, trading near $1.6080 <GBP=>.
The dollar slid to 118.75 yen <JPY=>, off 0.24 percent on the day. Its losses against Japan's currency were contained as traders heeded Japan's open call for a weaker currency, which last week was endorsed by U.S. Treasury Secretary John Snow.
ASSET MARKETS IN SPOTLIGHT
In the absence of new U.S. economic data, currency market players have been trying to glean clues about future exchange rate moves from financial asset markets and their predictions for the course of a U.S. recovery.
As a result, the dollar's losses in recent sessions has prompted some soul-searching among analysts.
"Is this it for the dollar?," asked Anne Parker-Mills, senior economist at Brown Brothers Harriman in New York, in a research note.
"That will depend on data due in early August, but the euro's performance this week, in the absence of much news, reinforces our underlying default assumption of euro strength," she added.
However, the Dow Jones industrial average has failed to provide a clear trend, trading in a tight range ever since it hit a one-year high in the middle of June.
French consumer spending rose 0.5 percent in June after a sharp drop in May but the rise was below expectations and suggested only modest improvement in the economy. A Belgian business sentiment index rose by more than expected in July.
Copyright © 2003 Reuters Limited.
Wednesday, July 23, 2003 1:40 p.m. ET
By Javier David
NEW YORK (Reuters) - The dollar fell broadly on Wednesday, undermined by falling U.S. stocks and renewed concerns about the health of the economy, underscored by remarks made by a senior U.S. Federal Reserve official.
The U.S. currency has risen for weeks against major rivals as expectations for a U.S. economic recovery have gathered steam and sent Wall Street stocks higher.
However, a lack of concrete evidence of any rebound has made markets restive and blunted the dollar's upward momentum from an extended period of weakness.
On a day when the greenback was already under pressure, traders were further unnerved by Fed Governor Ben Bernanke, who in a speech said the central bank could lower interest rates further to keep the recovery on track and ward off deflation -- a broad and pernicious fall in prices.
"It seems like every time an official starts mentioning the 'd-word' it seems to be a 'sell' signal for the dollar," said Michael Woolfolk, currency strategist at Bank of New York , referring to deflation.
"Every time we begin talking about the issue of cutting rates it seems to undermine the dollar," he added, indicating that in the absence of firm evidence of a recovery, the yield disparity between the U.S. and Europe was still a sore point for some traders.
As stocks declined after industry bellwethers Boeing Co. <BA.N> and AOL Time Warner <AOL.N> gave tepid earnings guidance, the euro soared as high as $1.1488 <EUR=> versus the dollar, a two-week high and up 1.30 percent on the day.
Market players are divided on the influence stocks have on the dollar's direction. But as Wall Street has become a barometer of future expectations about the economy, stock markets take the place of trading fodder for currency markets on days when there is little in the way of new economic data.
Against the Swiss franc, the dollar slid 1.20 percent on the day to stand near 1.3450 <CHF=>. Sterling recouped more than 3 cents from a three-month low reached against the U.S. currency this week, trading near $1.6080 <GBP=>.
The dollar slid to 118.75 yen <JPY=>, off 0.24 percent on the day. Its losses against Japan's currency were contained as traders heeded Japan's open call for a weaker currency, which last week was endorsed by U.S. Treasury Secretary John Snow.
ASSET MARKETS IN SPOTLIGHT
In the absence of new U.S. economic data, currency market players have been trying to glean clues about future exchange rate moves from financial asset markets and their predictions for the course of a U.S. recovery.
As a result, the dollar's losses in recent sessions has prompted some soul-searching among analysts.
"Is this it for the dollar?," asked Anne Parker-Mills, senior economist at Brown Brothers Harriman in New York, in a research note.
"That will depend on data due in early August, but the euro's performance this week, in the absence of much news, reinforces our underlying default assumption of euro strength," she added.
However, the Dow Jones industrial average has failed to provide a clear trend, trading in a tight range ever since it hit a one-year high in the middle of June.
French consumer spending rose 0.5 percent in June after a sharp drop in May but the rise was below expectations and suggested only modest improvement in the economy. A Belgian business sentiment index rose by more than expected in July.
Copyright © 2003 Reuters Limited.