The Dollar eased against the Yen and Euro on Monday, weighed down by weakness in the US stock market after comments by a top Citigroup official raised a new concern about global credit. US bond prices rose, boosted by safe-haven bids, while equities posted sharp losses, led by financial services, on Citigroup's weaker economic outlook.
Citigroup Inc Chief Financial Officer Gary Crittenden on Monday said he was "not optimistic" that markets for collateralized debt obligations and other fixed-income products, hammered by this summer's credit crunch, will soon recover.
The Dow Jones industrial average was down about 0.7 percent at the end of the trading day. Citigroup Inc and other global banks earlier said they were pooling money to prevent investment funds from having to dump assets into the market. The news initially lifted stocks, but shares later fell as the move reawakened concerns about the fallout from the credit squeeze.
The Yen, which tends to fall as risk appetite increases as investors borrow cheap yen to buy higher-yielding assets, fell in response to firmer equities earlier, and the Dollar hit a peak of 117.95, its highest since mid-August. But the Dollar slipped against the Yen as stocks dropped to trade at 117.11, down 0.15% on the day. Also weighing on the Dollar against the Yen was the surge in oil prices, which jumped to an all-time high above $86 per barrel on Monday. Oil prices were propelled by strong demand from booming commodity markets. The EurUsd rose 0.2 percent to 1.4203, not far from its record high 1.4280 set two weeks ago. EurJpy traded as high as 167.74, its highest level since July 23rd. It last traded at 166.74, little changed on the day.
With no major economic data on Monday, investors were focused on a speech by Federal Reserve Chairman Ben Bernanke on the economic outlook for a hint on the outlook for US interest rate cuts.
Market players are also cautious about making active bets on currencies ahead of the G7 meeting later this week, with recent volatile foreign exchange moves expected to be a major topic for discussion. European Central Bank President Jean-Claude Trichet told a Russian newspaper, which was published on Monday, that the Euro's exchange rate should reflect fundamentals and excessive currency moves are bad for growth.
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