Sun, Jan 09, 2005 - Page 10 News List

Greenback rallies to six-week high against the euro


The dollar rallied to a six-week high versus the euro and marched higher versus other major currencies on Friday, punctuating the massive rally it has staged in the first week of the year.

In late New York trading, the euro was at US$1.3083, down from US$1.3171 late Thursday and about 4.3 percent lower than it had been at the end of last week. Versus the Swiss franc, the dollar rose to SF1.1851, up from SF1.1743 late Thursday. The pound slid to US$1.8686 from US$1.8749.

The yen proved resistant to the dollar's rally, staying mostly steady in part due to a strong advance versus the euro. The euro slipped to ¥136.80 from ¥138.31, after weak euro-zone data and a continued correction from the euro's run-up against the yen late last year. The dollar was at ¥104.81 late Friday, down from ¥105.03 late Thursday.

The dollar's broad gains came mostly on the back of a healthy increase in US December payrolls and fresh comments from Treasury Secretary John Snow, who reiterated his long-held "strong dollar" policy but gave new hints about his plan to back up the policy by practicing fiscal discipline, sustaining growth, and reducing the US budget deficit.

"We support a strong dollar. We think a good, strong dollar is good for America. It's has been policy, it is our policy and it will be our policy," Snow said in an interview on Bloomberg Television.

Asked about his definition of a strong dollar, Snow defined it in terms of policy rather than exchange rates.

"We define strength in all its dimensions. The focus is on the things that sustain strength and, first and foremost, now it is dealing with the deficit," said Snow, referring to the US budget deficit.

Many market watchers took Snow's comments -- his most explicit to date about the links between the dollar, the economy, and the budget deficit -- as a subtle change in the Bush administration's policy, even though he said it hadn't changed. Last year, the administration's policy had been widely perceived to be one of benign neglect for the dollar, given the beneficial effects a weaker currency hands to US exporters.

In overseas trading, the dollar initially started to fall, but turned around amid weak euro-zone economic data. In early US trading, the Labor Department reported that US nonfarm payrolls grew by 157,000 last month after an upwardly revised increase of 137,000 in November. Revisions also showed 34,000 additional jobs were created in November and October than earlier believed. The unemployment rate was unchanged at 5.4 percent.

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