The dollar inched down toward record lows against the euro on Thursday as traders turned away from elections to refocus on structural problems in the US economy. With the US presidential vote out of the way and few signs that European policy-makers were particularly worried about the rising euro, traders sold dollars, although not aggressively enough to push the dollar to new record lows.
"The market got over any relief rally after the election in a hurry and now everyone is back looking at the fundamental picture in the US, namely the current account and fiscal deficits," said Ron Simpson, global currency analyst at Action Economics.
US President George W. Bush beat Democratic challenger Sen. John Kerry in elections on Tuesday and, with the same administration returning, most analysts do not foresee changes in policy that would help shrink the deficits any time soon.
By late afternoon in New York, the euro was trading at $1.2868 up 0.38 percent on the day but off session highs of $1.2897, a new eight-month high that took the euro closer to all-time peaks of $1.2927 reached in February.
Middle Eastern accounts and European central banks were among those said to be selling dollars for euros and other currencies.
"There was real money, not just speculators, buying euros," noted Simpson.
Speaking at a news conference after a European Central Bank meeting on Thursday, bank President Jean Claude Trichet said fast currency moves hurt economic growth, a well-worn refrain that analysts said did not suggest any great concern over the euro's rise. The ECB left rates on hold for the 17th month.
"Behind the scenes, the Europeans may be getting nervous, but until the euro gets over $1.30, I don't think we will hear much noise," said Simpson. "And we will probably hear from the European finance ministers before the ECB."
German Finance Minister Hans Eichel said the Group of Seven richest nations would discuss the euro-dollar rate if the euro zone's currency continued to strengthen at recent rates.
The dollar sank to new eight-year lows against the safe-haven Swiss franc at 1.1838 francs on reports, denied by a French hospital spokesman, that ailing Palestinian President Yasser Arafat had died.
The initial currency market reaction "of the dollar weakening modestly and currencies like the Swiss franc benefiting and gold inching higher ... are risk aversion plays," based on the perception of rising geopolitical risks if Arafat had died, said Lara Rhame, foreign exchange strategist with Credit Suisse First Boston in New York.
The dollar recovered to 1.1879 Swiss francs by late afternoon, down 0.48 percent in the session.
Against the yen, the dollar was trading down 0.21 percent at 106.03 yen.
Sterling was down 0.24 percent at $1.8438, stung by weak UK housing data.
The US dollar also hit a 12-year low against the Canadian dollar.
Dollar losses were tempered by a sharp decline in US oil prices, which fell more than 4 percent.
Traders in the foreign exchange market shrugged off a report that showed US jobless claims dipped by more than expected last week to 332,000, hinting the labour market was more robust than expected, ahead of the widely watched October US employment report due on Friday.
Economists polled by Reuters on average expect the data to show non-farm payrolls rose 169,000 in October.
Comments
Comments are closed.