By Andrew J. Johnson Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The dollar fell broadly against all major rivals Monday after the Group of 20 nations agreed over the weekend to avoid "competitive devaluation" of their currencies.
Even though the accord wasn't binding, it was enough to free investors from the fear of governments actively pushing their currencies lower. Investors returned to the global growth patterns that preceded the G-20 meeting and bought riskier assets.
But better-than-expected U.S. housing eased some of the big gains.
The low-yielding dollar fell to a fresh 15-year low against the yen, with analysts believing the market will soon test the Y79.75 level for the dollar, which represents the post-World War II low for the greenback reached in April 1995.
"The Japanese are in the most difficult position after the G20," with a verbal agreement in place to ward off interventions like Japan's, said Steven Barrow, head of G10 strategy at Standard Bank in London. "People are likely not as scared of the Bank of Japan now."
The euro pushed higher Monday overnight, testing its Oct. 15 eight-month high of $1.4161, before coming back.
The Australian dollar, highly linked to commodity exports and the pace of Asian-led global growth, surged by a robust 1.4%.
After better-than-expected September U.S. existing home sales reported Monday morning, the dollar gained back some poise, with the euro dipping below $1.40 shortly after.
"The U.S. dollar is broadly weaker as the passing of G-20 event risk allows a resumption of the broad trend in place over most of the past six weeks," said Credit Suisse FX analysts in New York.
Late Monday morning, the euro was at $1.3999 from $1.3923 from late Friday, according to EBS via CQG. The dollar was at Y80.56 from Y81.41, while the euro was at Y112.79 from Y113.46. The U.K. pound was at $1.5724 from $1.5667. The dollar was at CHF0.9701 from CHF0.9787.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, traded at lows last seen in January--at 76.962 from 77.494.
The final G-20 communique said the participating nations will "move towards more market determined exchange rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies."
That said, a march against the low-yielding dollar--pumped up for weeks by the expected return of so-called quantitative easing, which would flood the market with dollars and put downward pressure on the greenback--began anew Monday.
Against the yen, the dollar could test its record low this week, said Bank of Tokyo-Mitsubishi UFJ senior dealer Kenichi Nishii.
He said the G-20 statement that currencies should reflect economic fundamentals means the group won't welcome further intervention.
"I expect the yen will hit its record high sometime this week," he said.
The dollar was also hurt by research from Goldman Sachs suggesting the Fed may need to provide another $2 trillion in additional quantitative easing--maybe double that amount, but only in a worst-case scenario.
Meanwhile, the Australian dollar gained against the greenback after producer prices in Australia rose more than expected.
The market's focus will remain heavily on Wednesday's Australian inflation numbers which will be key for whether that nation's central bank seeks to tighten rates at next week's meeting. It has left its overnight target steady at 4.50% since May.
China's yuan fell slightly against the U.S. dollar late Monday, after the Chinese central bank guided its currency lower and the dollar rebounded against other major currencies.
-By Andrew J. Johnson, Dow Jones Newswires; 212-416-3092; andrewj.johnson@dowjones.com
(Enda Curran in Sydney contributed to this article.)
This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php
Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.
No comments:
Post a Comment