Dollar continues mini-rally
BERLIN (AP) – The dollar gained broadly against other major currencies Thursday, resuming a mini-rally against the euro and the yen after hitting a string of all-time lows against its European rival. The euro dipped to $1.3321 in late European trading, down from $1.3335 late Wednesday, as traders cashed in on the currency’s strength. The euro hit a record high of $1.3470 on Tuesday.
Concern over the U.S. trade and budget deficits has powered the euro to a series of new peaks over recent weeks, and the 12-nation currency has shot up from around $1.20 in September.
The dollar bought 104.50 Japanese yen in late New York trading, up from 104.04 yen late Wednesday.
But the twin U.S. deficits left analysts skeptical that the dollar’s gains would last.
“That’s the reason we don’t believe there is a trend against the euro,” Commerzbank currency analyst Carsten Fritsch said from Frankfurt. “We expect the dollar to weaken further.”
“The deficit problem is still there and there’s no signal by the U.S. government that it will tackle it.”
A weak dollar can help the U.S. economy by making American products cheaper for buyers abroad. European officials and executives worry the strong euro could hurt their economic recovery by making the continent’s exports more costly abroad.
The dollar got a lift against the yen from weaker-than-expected economic data in Japan, which stoked concerns that the country’s recovery is slowing and sent Tokyo’s main market index down by 1.5 percent Thursday.
The dollar was higher against other rivals as well. The U.S. currency traded at 1.1493 Swiss francs late in New York, up from 1.1485 late Wednesday, and at 1.2215 Canadian dollars, up from 1.2182. The British pound was quoted at $1.9275, down from $1.9342.
In the United States, an Energy Department report Wednesday that U.S. stocks of crude and heating oil rose more than expected last month also helped the dollar.
“This is a long-awaited correction. It was overdue,” Fritsch said.
German Chancellor Gerhard Schroeder briefly weighed in on the strong euro during a trip to Japan, suggesting that the European Central Bank could try to dampen its rise. Intervention in the foreign exchange market could involve buying dollars, selling euros or a combination of the two.
“I know about the independence of the European Central Bank. But one hint I want to give is one can sometimes learn something from Japan and its excellent currency policies,” Schroeder said.
He didn’t elaborate, but Tokyo is known for actively selling yen for dollars on the markets to keep its currency from rapidly appreciating.
A joint currency intervention by Japan and Europe probably wouldn’t halt the U.S. dollar’s recent dive, however, Bernd Pfaffenbach, Germany’s state minister of the Federal Ministry of Economics and Labor, told Dow Jones Newswires Thursday in Tokyo.
“It isn’t sufficient if either of us would try to solve the problem alone. I wonder even if it would be sufficient if Japan and the ECB would do something in common,” Pfaffenbach said, without elaborating.
“And concerted action would mean the United States included, and at the time being, I don’t see the intention from that side to come up with coordination,” he said.