|
Dollar falls against yen and euro { February 2007 } Original Source Link: (May no longer be active)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aEUEUB.ceLqs&refer=homehttp://www.bloomberg.com/apps/news?pid=20601087&sid=aEUEUB.ceLqs&refer=home
Dollar Weakens Against Yen, Euro as U.S. Adds Chinese Levies
By Bo Nielsen and Min Zeng
March 30 (Bloomberg) -- The dollar fell against the euro, touching its lowest level in more than a week, and declined versus the yen as the U.S. added tariffs on imports from China.
The U.S. currency plummeted on speculation the levies will reduce trade flow from China, the world's biggest holder of foreign reserves. The dollar extended its losses on concern tension in the Middle East will lead investors to avoid risk.
``It is pure protectionism,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research, of the new tariffs. ``The measure raises fear that China may retaliate. They may not keep buying Treasuries.''
The dollar fell 0.28 percent to $1.3369 against the euro at 1:28 p.m. in New York after earlier dropping to $1.3401, the lowest level since March 22. The U.S. currency dropped 0.35 percent to 117.66 yen.
Secretary of Commerce Carlos Gutierrez announced the new Chinese duties at a press conference in Washington. The Bush administration, which debated the change internally for months, faced pressure to expand the tariffs from steel companies, textile producers and other manufacturers and their advocates in Congress.
The dollar also weakened on a report denied by a U.S. Navy spokesman in Bahrain that U.S. investors there were told to leave because of the possibility of a conflict with Iran. A report on the Debkafile Web site, citing ``U.S. financial sources,'' said investors in Bahrain were told to halt business operation.
`Panic Reaction'
The implied volatility of a one-month dollar-yen option spiked over the reports on China and Bahrain, rising to 9.38 percent, the highest in almost two weeks, as investors expected currencies swings to heighten.
``You got a lot people jumping in on this who will get back quickly because it's not holding up,'' said Richard Vullo, head of corporate foreign exchange sales in New York at Fortis Financial Services. ``We may see this whole panic reaction reverse itself soon.''
The U.S. currency earlier gained after an inflation measure closely tracked by the Federal Reserve gained in February. The dollar extended its gains after the National Association of Purchasing Management-Chicago's business barometer, a gauge of U.S. manufacturing sentiment, rose this month more than economists forecast.
``People had been jumping on the bandwagon to buy the dollar after the Chicago data,'' said Robert Houck, chief currency trader in Minneapolis at Wells Fargo Bank. The Chinese tariffs ``pushed the positions out. The overall sentiment is negative against the dollar now.''
Fed's Price Gauge
The price gauge watched by the Fed that's tied to spending patterns and excludes food and energy costs gained 2.4 percent last month from February 2006 after rising a revised 2.2 percent in January from a year earlier, the Commerce Department reported. Last month's advance matched the median forecast of 21 economists surveyed by Bloomberg News.
The National Association of Purchasing Management-Chicago said its business barometer rose to 61.7 in March from 47.9 the previous month. Readings below 50 signal contraction. The median forecast of 58 economists surveyed by Bloomberg News was for a reading of 49.3.
Last Updated: March 30, 2007 13:28 EDT
|
|
