Sun, Nov 21, 2004 - Page 10 News List

Greenback at four-and-a-half year low against the yen


The US dollar languished Friday at or close to long-term lows against several major rivals, as investors seized on remarks from various top international monetary officials as an excuse to sell the US currency.

Statements by US Federal Reserve Chairman Alan Greenspan and US Treasury John Snow, speaking at separate events in Europe, dashed any hopes the dollar could maintain Thursday's rebound that helped it regain some of the ground lost earlier in the week.

Late afternoon, the dollar was at ?103.11 from ?104.19 late Thursday. The euro was at US$1.3025 from US$1.2959. The dollar was fetching 1.1613 Swiss francs from SF1.1626, while the British pound was at US$1.8574 against US$1.8506.

The US dollar's sell-off resumed Friday, with the greenback reaching a four-and-a-half year low against the yen and coming within an all-time low against the euro after Greenspan said in a speech to a conference for central bankers in Frankfurt that the US shouldn't be "complacent" about the growth of the current account deficit.

"Current-account imbalances, per se, need not be a problem, but cumulative deficits, which result in a marked decline of a country's net international investment position -- as is occurring in the United States -- raise more complex issues," Greenspan said.

Although Greenspan played down concerns about an imminent crisis in financing the current account deficit and reminded his audience that central bank interventions had no clear impact on foreign exchange rates, the US dollar slid sharply in response.

Snow had earlier stated during his visit to Poland that the weekend meeting of the Group of 20 industrialized and developing countries wasn't a forum for discussions of exchange rates.

Positioning ahead of the G-20 gathering in Berlin accounted for some of the day's movements, said traders. Comments by euro-zone officials and their counterparts in Asia also figured into the fine tuning.

At one point, the euro rose as far as US$1.3067, just a hair's breadth from its all-time high from Thursday at US$1.3074 and the dollar dropped as far as ?102.40. During the New York afternoon, the US dollar struggled off its intraday lows in thin trading.

Andy Busch, senior currency strategist at Harris Nesbitt in Chicago, said that the market seized on Greenspan's comments to sell US dollars because the Fed chairman's remarks can be interpreted as indicating US authorities are too sanguine about the impact of the current account deficit.

However, Busch noted that if Greenspan had said the opposite -- that the US dollar was bound to sink because of the deficit -- then investors would have sold the dollar even more heavily.

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