Friday July 03, 2009
NEW YORK: The US dollar dropped to its lowest in more than three weeks against the euro on Wednesday, pressured by news China has asked to debate proposals for a new global reserve currency at next week's Group of Eight summit. Gains in global stocks as well as improved manufacturing activity data in Europe and China have also hurt demand for the dollar as a safe haven.
But it was the report on China, citing sources that fuelled a steep round of dollar selling, adding to the currency's earlier losses in Asia and London. "This remains an Achilles' heel for the dollar and will be a problem going into the G8 meeting," said Richard Franulovich, senior currency strategist at Westpac in New York.
"I think this is making a mountain out of a molehill and I think China is playing games. The fear mow is that there could be a sharper G8 statement next week on this issue." In late afternoon trading, the euro was up 0.8 percent on the day at $1.4147. It earlier traded as high as $1.4201 in the wake of the China news, its highest since June 5, according to Reuters data.
The ICE Futures' dollar index, a measure of the greenback's value against a basket of six major currencies, fell 0.6 percent to 79.649. Other analysts were also skeptical about the China news. "We are struck by the gap between China's declaratory policy - what they say - and their operational policy - what they do," said Marc Chandler, head of global currency strategy at Brown Brothers Harriman in New York.
What China says sounds like they want to end the dollar's role as the top reserve currency, Chandler said, but the world's third-largest economy has not backed its rhetoric as it continues to accumulate dollars and Treasuries. China remains the biggest holder of US Treasuries with about $763.5 billion in holdings as of April, the latest data available from the US Treasury Department. It has roughly $2 trillion in currency reserves and some estimates from analysts suggested China holds about 65 percent to 75 percent of these in dollars.
Earlier in the session, positive data on manufacturing in Europe and China boosted economic optimism around the world. That helped US stocks and commodity currencies, such as the Canadian and Australian dollars.
That said, a round of mixed US data including readings on the labour, manufacturing and housing sectors, contributed to a bias toward dollar weakness as safe-haven support wanes, analysts said. But they warned that trading would remain volatile ahead of a key US employment report on Thursday. Economists expect the US economy to have shed another 363,000 jobs in June after losing 345,000 in May. The dollar rose 0.3 percent to 96.61 yen while the euro gained 1.1 percent to 136.71 yen.
(Reuters)
NEW YORK: The US dollar dropped to its lowest in more than three weeks against the euro on Wednesday, pressured by news China has asked to debate proposals for a new global reserve currency at next week's Group of Eight summit. Gains in global stocks as well as improved manufacturing activity data in Europe and China have also hurt demand for the dollar as a safe haven.
But it was the report on China, citing sources that fuelled a steep round of dollar selling, adding to the currency's earlier losses in Asia and London. "This remains an Achilles' heel for the dollar and will be a problem going into the G8 meeting," said Richard Franulovich, senior currency strategist at Westpac in New York.
"I think this is making a mountain out of a molehill and I think China is playing games. The fear mow is that there could be a sharper G8 statement next week on this issue." In late afternoon trading, the euro was up 0.8 percent on the day at $1.4147. It earlier traded as high as $1.4201 in the wake of the China news, its highest since June 5, according to Reuters data.
The ICE Futures' dollar index, a measure of the greenback's value against a basket of six major currencies, fell 0.6 percent to 79.649. Other analysts were also skeptical about the China news. "We are struck by the gap between China's declaratory policy - what they say - and their operational policy - what they do," said Marc Chandler, head of global currency strategy at Brown Brothers Harriman in New York.
What China says sounds like they want to end the dollar's role as the top reserve currency, Chandler said, but the world's third-largest economy has not backed its rhetoric as it continues to accumulate dollars and Treasuries. China remains the biggest holder of US Treasuries with about $763.5 billion in holdings as of April, the latest data available from the US Treasury Department. It has roughly $2 trillion in currency reserves and some estimates from analysts suggested China holds about 65 percent to 75 percent of these in dollars.
Earlier in the session, positive data on manufacturing in Europe and China boosted economic optimism around the world. That helped US stocks and commodity currencies, such as the Canadian and Australian dollars.
That said, a round of mixed US data including readings on the labour, manufacturing and housing sectors, contributed to a bias toward dollar weakness as safe-haven support wanes, analysts said. But they warned that trading would remain volatile ahead of a key US employment report on Thursday. Economists expect the US economy to have shed another 363,000 jobs in June after losing 345,000 in May. The dollar rose 0.3 percent to 96.61 yen while the euro gained 1.1 percent to 136.71 yen.
(Reuters)
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