Thursday November 22, 2007 - 12:06:11 GMT
Share This Story
Reuters - www.reuters.com
FOREXEWS-Dlr sets fresh record lows vs euro, Swiss franc
(Changes byline, updates prices, adds quotes)
By Meg Clothier
LONDON, Nov 22 (Reuters) - The dollar hit new record lows
against the euro, the Swiss franc and a basket of currencies on
Thursday amid a growing belief that the U.S. Federal Reserve
will cut interest rates again next month.
Adding to downward pressure on the dollar was a recovery in
equity markets and a slight pick up in risk appetite which made
investors more willing to put on riskier trades in high-yielding
or emerging market currencies.
The more risk-friendly mood also hit the yen, a favourite
source of cheap funding for the carry trades. The Japanese
currency eased from the previous day's 2-1/2 year peaks versus
the dollar, while high-yielding Australia and New Zealand units
-- top carry targets -- gained broadly.
With the United States marking the Thanksgiving holiday on
Thursday and Japan shut on Friday, volumes were likely to remain
subdued into the end of the week, potentially exacerbating
"Overall the picture is still very much skewed towards a
weaker dollar, although the dollar's performance is likely to be
far more mixed going forwards because we believe the
high-yielders are going to come under further pressure," said
Ian Stannard, senior foreign exchange strategist at BNP Paribas.
"We could see a little bit of a pull-back in the
euro/dollar, a dip below $1.48, maybe heading into the
$1.4750/$1.4725 area, but from there I'd be looking for
euro/dollar to rebound, heading up towards $1.50," he added.
The euro hit a record high of $1.4873, according to Reuters
data on Thursday, bringing its year-to-date gains to around 12.5
percent. It also set fresh all-time highs against the ECB's
trade-weighted basket of 24 currencies at 111.77 <EUREER=ECBF>.
So far European policymakers and politicians have been less
vocal about the euro's rise than they were during its 2004
rally, in part because economic growth has held up.
Germany's export industry could cope with euro at $1.50, the
head of BGA exporters' group was quoted as saying on Thursday.
But the chief executive of Daimler (DAIGn.DE: Quote, Profile, Research) said the
German car and truck maker would have to boost productivity even
further to offset FX developments.
The dollar fell to a new record low of 1.1006 Swiss francs
<CHF=> before recovering a little to trade at 1.1031 francs by
The dollar index, which measures the dollar's value against
a basket of major currencies, hit a record low of 74.916 (.DXY: Quote, Profile, Research).
Expectations for further U.S. rate cuts were reinforced on
Tuesday by the Fed's projection that economic growth will slow
next year, even though the central bank adopted a reasonably
hawkish tone and said that October's cut was a "close call".
U.S. short-term interest rate futures are pricing in a 25
basis point Fed cut to 4.25 percent on December 11 and are even
giving a small chance of a 50 basis point move.
However, the dollar gained against the yen to 108.67 yen
<JPY=>, pulling away from the 2-1/2 year low of 108.23 yen hit
on Wednesday, according to Reuters data .
But some economists believe this could prove short-lived.
"Fundamentally the outlook favours further yen appreciation,
given narrowing yield differentials and the likely persistence
of volatile market conditions," BTM-UFJ wrote in a client note.
Both factors would reduce the attractiveness of the carry
trade, where investors sell the low-yielding yen to fund
higher-yielding investments, leading BTM-UFJ to target 105 yen.
(Additional reporting by Toni Vorobyova)
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
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."