Tue, Nov 23, 2004 - Page 1 News List

US dollar declines to near-record low

AGENCIES , SINGAPORE, TOKYO AND FRANKFURT

The US dollar held near a record low against the euro and a four-and-a-half-year low versus the yen yesterday, sending Asian shares sharply lower, after a meeting of rich and developing nations said nothing to arrest its fall.

The US dollar was trading at ?103.18 on the Tokyo foreign exchange market at 5pm yesterday, down ?1 from late Friday.

The euro traded at a near-record high US$1.3044 in early currency business in Europe yesterday, with the dollar expected to slump further.

The rate, equivalent to 76.62 euro-cents per dollar, was slightly shy of last week's record-high trading high of US$1.3068.

A communique issued by the Group of 20 finance ministers and central bank governors in Berlin on Sunday made no explicit reference to currency swings, despite mounting concern in Europe and Japan over the US dollar's slide and ballooning US deficits.

Comments by US Federal Reserve Chairman Alan Greenspan that the greenback would weaken further also weighed on the currency.

Taiwan's weighted index lost 3.12 percent and Australia's S&P ASX 200 sagged 1.08 percent.

Japan's Nikkei stock average dropped 2.11 percent to 10,849.36 in its biggest daily fall since Aug. 13, as the stronger yen threatened to eat into exporters' earnings.

"Today's reaction does seem a bit overdone but with the outlook for the currencies so unclear, it's going to be hard for buyers to come forward," said Joji Maki, senior director at Baring Asset Management Japan.

South Korean technology stocks were also sold as the won hit a seven-year high of 1,060.0 per dollar.

A pledge at the G20 meeting by the US to maintain a strong dollar did not support the currency.

Bush regularly pledges to maintain "the strong dollar" but currency traders increasingly interpret the term as a cover for a policy of allowing the US dollar to sink.

Greenspan said market appetite for US assets would eventually fall, raising the prospect that foreign funds flows into the US would become insufficient to fund its gaping current account deficit.

Analysts said that Greenspan's comments, which echoed those of other Fed officials in recent weeks, were nevertheless the first clear pointer from the Fed chief to a weaker US dollar, and were likely to accelerate the currency's decline.

"Although there may not be an explicit policy to drive the US dollar down, Greenspan seems to be saying that to solve the US current account problem a fall in the dollar is unavoidable," said Ko Haruki, head of institutional forex sales at HSBC.

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