Sun, Oct 17, 2004 - Page 10 News List

US dollar hits lowest level in months against euro

AP , NEW YORK

The US dollar slid to a seven-month low against the euro and a six-week trough against the yen on Friday, after US economic data indicated the fourth quarter had made a sluggish start.

The decline shattered the tight ranges in which the dollar has traded in for months against the euro, adding a dose of momentum investors have long been wishing for.

Market watchers are now waiting to see if the dollar will move to new lows against the euro -- and the yen -- next week or if it will climb back into the US$1.1950-US$1.2460 range in which the dollar had been stuck since May. There are no major US data announcements Monday. In late trading, the euro was at US$1.2476 from US$1.2390 late Thursday. The dollar was at ¥109.17 from ¥109.58 Thursday and at a three-month low of SF1.2324 against the Swiss franc from SF1.2443 late Thursday.

The British pound climbed to US$1.8036 from US$1.7967.

In one of the more volatile sessions seen in months, the euro's initial surge came shortly after the release of Federal Reserve Bank of New York's Empire State manufacturing survey, which slipped to a reading of 17.43 this month from 27.26 last month. The consensus forecast had been 25.6.

The dollar then suffered fresh losses following the release of mid-October's University of Michigan index, which showed consumer confidence dipped to 87.5 from last month's 94.2. Forecasts had indicated a 94.6 reading.

These moves sent the dollar to an intraday low of ¥108.81 and pushed the euro up as far as US$1.2505. The dollar got some relief after Federal Reserve chairman Alan Greenspan said that current record high oil prices would eventually "wash over." However, the Fed chairman also warned that consumer spending could be affected if oil prices stay put.

It was the first time Greenspan has spoken publicly since the release of the weak nonfarm payrolls data last Friday. Following Greenspan's comments, the euro slipped back below what had been the key resistance point of US$1.2460, but the single currency lifted again during afternoon trading.

Steven Englander, chief currency strategist at Barclays Capital in New York said the dollar had lifted on the Fed chair's comments because he gave no indication the high oil prices would affect rate-tightening decisions.

"The market was looking to see if Greenspan would at least give a nod to the idea that the effects of oil prices on the economy are strong enough to influence monetary policy, which he didn't do," Englander said.

The dollar's ups and downs had investors trying to work out where the dollar would go next.

While the dollar was lower across the board against major currencies, it ended more or less flat against commodity currencies. The US dollar was at 1.2521 Canadian dollars from C$1.2553 late Thursday and the Australian dollar was at US$0.7301, slightly higher from US$0.7281 late Thursday.

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