Sun, Nov 28, 2004 - Page 10 News List

Greenback resumes its plunge after rallying briefly


The US dollar was lower against the euro on Friday, after a volatile session that saw the US currency rally from a new all-time low against the euro, before falling back toward the end of trading.

Traders said volumes were extremely thin and that added to the swings in the dollar's value. Markets were closed in the US on Thursday for a holiday, and they shut early on Friday afternoon. There was no US economic data to contend with.

In afternoon trading, the euro was at US$1.3291, from US$1.3242 late Thursday and off the high of US$1.3329 overnight. The dollar was at ?102.55, from ?102.53, and had dipped to ?102.14 overnight. The dollar was at 1.1382 Swiss francs, from SF1.1412. Sterling was at US$1.8964, from US$1.8884 on Thursday.

The euro was also climbing against the yen, reaching ?136.31, from ?135.80 late Thursday.

The dollar fell back overnight after a report in the China Business News that China has started reducing its massive holdings of US Treasury purchases because the dollar's decline is causing them to lose value.

The US currency was also pressured lower by comments from Charles Bean, a member of the Bank of England's Monetary Policy Committee, who said the dollar may still face "substantial" depreciation.

However, the dollar started to bounce back after Yu Yongding, an advisor to the People's Bank of China's monetary policy committee quoted in the China Business News story, said that China's Treasury purchases are still growing. He said his comments to the China Business News were based on data from the US Federal Reserve and not from any inside knowledge of China's reserve management.

That sparked profit-taking which took the US currency above its levels of late Thursday, and some analysts said they believed the dollar recovery could leave the euro as low as US$1.31. Yet once again, hopes of a sustained dollar rally proved misplaced and the dollar resumed its downward path around midday, drifting back toward the overnight lows.

His comments came too late in the day to affect markets.

Analysts say the dollar should remain under pressure next week, though upcoming US data could bring about a correction given how short dollars the market is.

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