The US dollar held in a narrow range against the other main currencies on Friday as traders tried to gauge the impact of a massive financial sector bailout and digested news of bigger-than-expected US job losses.
The euro, which had at one point plunged to a near 12-month low of US$1.3703, later rebounded and was trading at US$1.3781 at 9pm GMT against US$1.3818 late on Thursday. The US currency was little changed at ¥105.27 from ¥105.28 on Thursday.
Trading was volatile as dealers kept a close eye on events in Washington, where the US House of Representatives approved a US$700 billion plan to salvage the shattered financial system and restore confidence to global lenders. The measure was quickly signed by US President George W. Bush.
John Kicklighter at Forex Capital Markets cited a “muted reaction” from traders, suggesting “there may be skepticism over this bill’s effectiveness.”
While markets tried to assess the impact of the plan, trade was impacted by the troubles in the banking sector.
“The euro weakened against the dollar after a surge in demand for dollars,” Christine Li at Moody’s Economy.com said.
“The escalation in the financial turmoil has caused many European financial institutions to seek to repay their dollar loans, causing a shortage,” Li said.
Earlier in the day, the euro was under pressure from comments by European Central Bank (ECB) President Jean-Claude Trichet that were taken to mean a reduction in eurozone interest rates, perhaps as early as next month.
Trichet signaled a shift at the ECB, where it now appears that threats to eurozone growth, rather that inflation, are concentrating minds.
Analysts said the change in priorities pointed to a cut in the benchmark rate, which currently stands at 4.25 percent, far higher than the US Federal Reserve’s 2 percent.
The dollar’s gains were later stalled on a report from the US Labor Department that the US economy lost 159,000 jobs last month as the weight of a housing collapse and credit crunch hit a broad swath of industries.
The report, seen as one of the best indicators of economic momentum, showed a sharp rise in the number of cuts after 73,000 job losses in August.
In late New York trading, the dollar stood at 1.1287 Swiss francs from SF1.1353 on Thursday.
The pound was at US$1.7722 after US$1.7635 on Thursday.
Malaysia’s ringgit and the Thai baht fell this week on concern the deepening credit crisis will push the US economy into a recession and reduce demand for Asian exports and emerging-market assets.
The Philippine peso and the Singapore dollar also declined as a regional stock index slumped 7.6 percent, the worst week in 13 months. Overseas investors pulled almost 26 billion ringgit (US$7.5 billion) from Malaysia’s debt market since April, according to data from the central bank.
The ringgit fell 0.9 percent this week to 3.4670 per US dollar as of 4:15pm on Friday in Kuala Lumpur, its biggest decline since the five days ended Sept. 5, according to data compiled by Bloomberg. The baht declined 0.8 percent this week to 34.21.
The Singapore dollar dropped 1.4 percent in the five days to S$1.4488.
The Philippine peso declined 0.6 percent this week to 47.025, extending its losses this year to 12.2 percent, according to Tullett Prebon Plc.
Elsewhere, the New Taiwan dollar lost 0.4 percent this week to NT$32.18 and Vietnam’s dong was unchanged at 16,600.
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