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Dollar rises six days before election Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000101&sid=amhyAE54YO_0&refer=japanhttp://quote.bloomberg.com/apps/news?pid=10000101&sid=amhyAE54YO_0&refer=japan
Dollar Rises Against Euro as Oil Prices Retreat From Record
Oct. 27 (Bloomberg) -- The dollar rose against the euro and erased losses against the yen, as crude oil prices fell from a record after a report showed U.S. stockpiles rose more than expected.
``The dollar bounced as oil prices fell,'' said Brian Taylor, head currency trader at Manufacturers & Traders Trust Co. in Buffalo, New York, with $50 billion in assets. ``A sharp decline in oil prices is one of the things that might force this market to give away the long euro, short dollar positions.''
Against the euro, the dollar strengthened to $1.2712 at 2:07 p.m. in New York, from $1.2769 late yesterday, according to EBS, an electronic foreign-exchange dealing system. Yesterday it weakened as far as $1.2842, less than one cent from its record low $1.2930 in February.
Taylor said a close today on the dollar above $1.2740 per euro may trigger further gains to $1.27.
Against the yen, the dollar traded at 106.59, from 106.69 late yesterday. Earlier today it fell as low as 106.22 yen, the weakest since April 13.
The dollar has fallen 3.9 percent in the past month against the euro and 4.2 percent against the yen partly on concern higher energy prices may hurt U.S. consumer spending and economic growth. The International Monetary Fund last month cut its 2004 and 2005 growth forecast for the U.S. by 0.3 percentage point. The U.S. economy will expand 4.3 percent this year and 3.5 percent in 2005, the IMF said.
`Temporary Support'
``The drop in oil would provide some temporary support'' to the dollar, said Michael Klawitter, a currency strategist at WestLB AG in Frankfurt.
Klawitter said the dollar may rebound to as much as $1.2670 per euro.
Dollar gains held after the Federal Reserve said today in its regional assessment of economic conditions, also known as the Beige Book, that the economy kept growing in September and early October. It said the growth rate was constrained by high energy costs that held back consumer and business spending.
Earlier today the dollar weakened, then pared its losses after a report showed sales of new homes in the U.S. unexpectedly rose in September to the third highest total on record, suggesting the housing market is helping spur the economy.
Another report showed orders for durable goods, items made to last at least three years, rose 0.2 percent in September. Excluding transportation equipment, orders rose 1.7 percent.
`Not Overweight' Euros
Today's gains against the euro may be limited as investor positioning suggests the European currency will resume its advance, according to the research by Dresdner Kleinwort Wasserstein.
The euro's gain in the past week hasn't yet spurred Dresdner's importing or exporting corporate clients to become more bullish on the currency, a weekly bank survey of about 200 German companies showed.
Only 4 percent more corporate clients turned more bullish on the euro compared with last week, suggesting there may be more support for a move higher in the euro, said Sonja Marten, a currency strategist at Dresdner in Frankfurt, yesterday.
Further purchases of euros may also come from fund and asset managers, who are ``generally not overweight in euros,'' Marten said. That group of investors were net buyers of 43.4 percent of Dresdner's total business in the euro-dollar exchange rate in the week ended Oct. 22, the bank said.
Yen's Strength
The yen rose against the dollar earlier today on speculation the Japanese government isn't yet ready to resume currency sales after a seven-month hiatus. In the past month the yen has strengthened 4.4 percent against the dollar.
Japan may be delaying potential yen sales in order to avoid becoming a factor in the Nov. 2 U.S. presidential election, said Mansoor Mohi-uddin, global head of foreign exchange strategy at UBS in London.
``Japanese authorities don't want to be seen to be intervening before the elections,'' said Mohi-uddin. On Oct. 29, a finance ministry report will reveal any sales of yen during a one-month period ending tomorrow, he said.
Once the ministry's report is published, the Bank of Japan, at the behest of the Ministry of Finance, may sell its currency for dollars ``in the next few days,'' Mohi-uddin said.
Demand for the yen may also accelerate as gains in Japanese stocks attract foreign investors. The Japanese stock market is the world's most attractive, according to analysts at JPMorgan Chase & Co.'s. Japan's Topix index may rise to as high as 1300 by year-end, a 20 percent gain from yesterday's close in Tokyo.
To contact the reporter on this story:
Vivianne C. Rodrigues in New York at vrodrigues@bloomberg.net
To contact the editor responsible for the story:
Daniel Moss at dmoss@bloomberg.net
Last Updated: October 27, 2004 14:19 EDT
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