Tuesday, 10 November 2009
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U.S. Dollar Falls Sada Reddy's Fiji Sea Shells Appreciate
LONDON -- The U.S. dollar came under selling pressure Monday after the International Monetary Fund suggested the dollar has further to fall.
The decline has taken the euro back up close to $1.50 as investors once again show a preference for risky assets.
Equity markets have been big winners, with most global markets posting gains.
Friday's news that U.S. nonfarm payrolls fell more than expected and that the unemployment level in the U.S. rose to its highest level in 26 years initially helped the dollar.
U.S. stocks, which would normally have been disappointed, remained firm with the Dow Jones Industrial Average gaining 0.2% on the day.
The meeting of finance ministers from the Group of 20 leading economies over the weekend in Scotland also proved uneventful for financial markets. The group failed to mention currencies at all in their final communiqué.
More direction appeared to come from comments by U.S. Treasury Secretary Timothy Geithner and U.K. Prime Minister Gordon Brown, who warned against ending financial crisis support programs prematurely. In other words, there won't be any rush to tighten monetary policy.
This, rolled in news that Moody's raised the outlook for China's A1 rating to "positive" from "stable," that Australian housing finance approvals increased by a sharp 5.1% in September and that the price of gold hit a new record high just over $1,100 an ounce, all contributed to a rise in global optimism.
The IMF added to dollar's woes by commenting that although the dollar has "moved closer to medium-run equilibrium," it continues to trade "on the strong side."
Although some analysts reckon that the dollar should remain in fairly narrow trading ranges now, others suggest that the U.S. currency could come under renewed, heavy selling pressure if Fed officials speaking this week suggest that rates will stay low for longer because of the weak payrolls.
"Any signals that the weaker data could prolong the period over which the policy rate remains 'exceptionally low' could heap further pressure on the dollar," said Gareth Berry, a currency strategist with UBS in Singapore.
The dollar had slipped back from an earlier high of ¥90.28 to trade at ¥89.91, hardly changed from ¥89.96 late on Friday in New York, according to EBS. The euro rose to $1.5000 from $1.4844 and to ¥134.85 from ¥133.53.
The dollar was down at 1.0071 Swiss franc from 1.0177 franc while the pound bounced up to $1.6826 from $1.6608.
Wall Street Journal Online 11-09-09 per Nicholas Hastings
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