FOREX NEWS-Dollar drops to new low vs euro as on US rate view
Thu Oct 18, 2007 4:16pm EDT
(Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 18 (Reuters) - The dollar fell to a record low against the euro and a basket of currencies on Thursday, pressured by soft U.S. economic data and sluggish corporate earnings that bolstered chances of an interest rate cut.
Bank of America's (BAC.N: Quote, Profile, Research) poor third-quarter earnings on the back of mounting credit losses took their toll on the currency market early as it fanned concerns that the global liquidity crunch is far from over. It also strengthened the case for a cut in the target federal funds rate from the current 4.75 percent to avert a sharper slowdown.
U.S. short-term rate futures on Thursday showed a 68 percent implied chance of a rate cut at the Fed's next monetary policy meeting on Oct. 30-31. Futures now price fully a half-percentage-point's worth of cuts by mid-2008.
"Rate cut expectations have shifted quite significantly. As recently as Monday, expectations for a rate cut were around 35 percent, now it's about 70 percent," said Kathy Lien, chief FX strategist at DailyFX.com. "That is predominantly the reason why the U.S. dollar is weaker."
The Philadelphia Federal Reserve business activity survey was the latest report to provide evidence of a slumping U.S. economy. For details see [ID:nN18417318]. Earlier in the session, higher-than-expected initial weekly U.S. jobless claims also gave the dollar a negative tone. [ID:nN18331664]
Both reports followed dire U.S. housing data on Wednesday, suggesting the slowdown is deeper than many initially thought.
In late afternoon trading, the euro was up around 0.6 percent on the day at $1.4294 <EUR=>, after climbing to a lifetime peak at $1.4310 in the opening hours of the New York session, according to Reuters data.
The dollar index, a measure of the dollar's value against six major currencies, was down 0.7 percent at 77.590 (.DXY: Quote, Profile, Research). Earlier, it fell to 77.478, the lowest since its post-Bretton Woods inception more than 30 years ago. It was the largest one-day percentage drop in the index since Sept. 28.
The yen, on the other hand, gained as investors became more risk-averse and unwound carry trades in which they buy high-yielding currencies funded by borrowing low-yielders such as the yen.
It was the yen's fourth straight day of gains against the dollar, the longest streak since the four days leading up to the Fed's surprise half-percentage-point cut in the discount rate, at which it lends to banks, on Aug. 17.
The dollar was 0.8 percent weaker at 115.68 yen <JPY=>, near an earlier two-week low. The euro fell 0.2 percent against the yen to 165.37 yen <EURJPY=>.
The dollar was already weak before the release of the Bank of America's earnings, still reeling from the effects of weak housing data the previous session.
"The combination of further U.S. housing woes and disappointing earnings at (Bank of America) raises the downside risks for the U.S. economy," said Ashraf Laidi, chief currency analyst at CMC Markets USA in a research note.
Foreign exchange investors are also cautious ahead of a Group of Seven meeting over the weekend. European businesses on Thursday urged France, Germany, and Italy to push for a clear commitment from the G7 group of rich industrial nations against further euro appreciation.
But few analysts were willing to bet any action will be taken to address the euro's surge against the dollar.
"The reality is that currency volatility (in the euro) has fallen significantly from the spikes seen in mid-August," said Calyon in a research note.
On the U.S. side, the bank believes that dollar weakness will not be mentioned in the statement at all given its limited impact on inflation.
"Given that there is little sign of imported inflation pressure at present, it gives further reason for the U.S. not to act in any form of concerted intervention," Calyon bank said.
Analysts said the G7's focus is more likely to be on the tightly controlled Chinese yuan currency.
Reuters journalists are subject to the Reuters Editorial Handbook which requires fair presentation and disclosure of relevant interests.
Forex Trading News
Daily Forex Market News Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Forex News Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Elevate Your Trading With The Amazing Trader!
The Amazing Trader includes:
Actionable trading levels delivered to YOUR charts in real-time.
POTENTIAL PRICE RISK: HIGH to Medium- Wed --14:15 GMT-- US- Industrial Production
POTENTIAL PRICE RISK: HIGH- Wed -- 15:00 GMT-- CA- Bank Of Canada Decision
John M. Bland, MBA co-founding Partner, Global-View.com
Max McKegg's Daily Forex Trading Forecasts
Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.