Dollar Dives to New Lows
By Andrea Ricci
Reuters
Friday, December 3, 2004
http://www.reuters.com/newsArticle.jhtml? [1]
type=businessNews&storyID=6992925
NEW YORK -- The dollar slid to a new record low
against the euro on Friday amid disappointing U.S.
jobs data and a perception that the United States
was in no hurry to stem the dollar's fall.
The dollar crumbled to $1.3458 per euro, according
to Reuters data, a decline of nearly 1.4 percent and
a new record low. It also fell more than 1 percent
against other currencies.
It was the dollar's biggest fall against the euro since
early August and the eighth time in the last nine
sessions that the dollar has made a new low
against the euro.
The initial impetus for the dollar's decline was a U.S.
jobs report which showed payrolls rising at a slower
rate than economists had forecast in November.
The selloff gathered pace after a German newspaper
cited a high-ranking U.S. Treasury official as saying
the United States would intervene to support the
dollar only after the euro reached $1.45.
Dealers and analysts said they viewed the German
report with some skepticism, noting that the Treasury
was more likely to be concerned about market
volatility than about a particular currency price level.
Still, they said the report helped underscore the
market's belief that the U.S. had no plan to stop the
dollar's slide, despite its official strong dollar policy.
"I don't think the market was perceiving any near-term
risk of intervention either in terms of actual timing or
levels, but when they see a story like this it reinforces
what has already been in the market's mind about the
administration's view," said Bob Lynch, senior
currency strategist at BNP Paribas.
By early afternoon in New York, the euro was trading
at $1.3452, up 1.37 percent and just below the day's
highs.
Against the yen the dollar was off more than 1 percent
to 102.08.
Against the Swiss franc the dollar was trading at 1.1305
francs, down 1.76 percent on the session and a new
nine-year low. The dollar also fell to new 9-year lows
against a basket of currencies .
Sterling was up 0.91 percent to $1.9420.
U.S. Treasury Secretary John Snow, speaking on
CNBC television, reiterated the administration's
support for a strong dollar.
The dollar came under pressure early after the U.S.
government reported that non-farm payrolls rose
just 112,000 in November, below economists'
median forecast for a 180,000 rise. The jobless
rate was 5.4 percent, matching forecasts.
"Short-term players were positioned for something
better than consensus, so the jobs number
exacerbated the dollar's move down," said Shaun
Osborne, chief currency strategist at Scotia
Capital in Toronto.
The softer than expected report hurt the dollar
because it cast some doubts on the pace of the
U.S. economic recovery and also raised questions
about the pace at which the Federal Reserve would
continue to raise interest rates, analysts said.
The dollar fleetingly recouped a few losses after the
Institute for Supply Management non-manufacturing
report was reported at a stronger than expected
61.3 for November, above economists' expectations
for a reading of 58.7.
The dollar has lost almost 10 percent of its value
against the euro since September, mostly on
concerns over the funding of the gaping U.S. current
account gap.
With the market biased toward a weak dollar, the
dollar has been vulnerable to weak U.S. economic
data but has failed to profit from evidence of
economic strength.
The dollar's big decline on Friday made it likely that
the day's price action would render moot a
dollar-bullish technical signal seen on Thursday,
technical analysts said.
On Thursday, euro/dollar had a bearish key reversal
day, where it closed lower than the previous day's
lows after hitting new highs, suggesting a turnaround
for the currency pair. But technical analysts said
Friday's euro/dollar rally would show that Thursday's
signal was false.
"If we get a decent close, (the euro) will probably
continue to grind higher next week,' said Scotia's
Osborne.
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