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US isnt concerned about dollar record falls Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aUTL2xt2HC3M&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aUTL2xt2HC3M&refer=home
Dollar Falls to Record Versus Euro as ECB Remains Mum on Stance
Nov. 24 (Bloomberg) -- The dollar declined to a record against the euro for the seventh time this month amid speculation the European Central Bank will refrain from attempting to stem the 12-nation currency's appreciation.
ECB officials haven't protested the dollar's decline since Nov. 19, a period in which the dollar extended its drop versus the euro by almost 2 cents. Exports, which account for about a quarter of the euro region's economy, would be ``crushed'' should the euro advance beyond $1.35, according to Paresh Upadhyaya at Putnam Investments in Boston.
The central bank ``has been notably silent so far,'' said Upadhyaya, a currency portfolio manager who helps oversee $29 billion. ``Outright intervention is not likely at this point.''
Against the euro, the dollar fell to $1.3175 at 12:22 p.m. in New York from $1.3086 late yesterday, according to EBS, an electronic currency-dealing system. The dollar earlier touched a record low $1.3180. It dropped to 102.88 yen, from 103.31, after earlier weakening to 102.56, the lowest since March 2000.
The dollar has lost about 32 percent against the euro since the start of 2002. The U.S. currency is also down today against the British pound, Swiss franc and the dollars of Canada and Australia. Merrill Lynch & Co. today cut its dollar forecasts.
Yen Strengthens
The yen reached the strongest in 4 1/2 years after Tsutomu Takebe, secretary-general of Japan's ruling Liberal Democratic Party, told a Tokyo press dinner that the yen isn't at a level that merits a policy change. Japan sold a record 32.9 trillion yen ($320 billion) in the year through March, and hasn't sold since, according to finance ministry data through October.
Europe's common currency has gained 1 percent since Nov. 19, when ECB President Jean-Claude Trichet said he will stick to his view that the euro's moves are ``brutal'' and ``not welcome.''
ECB policy makers may refrain from selling the euro to halt gains unless it rises to $1.35 ``in the next few weeks,'' said Kristjan Kasikov, a currency strategist in London at Calyon, the investment-banking unit of Credit Agricole SA. ``At the moment they might still be hoping that this is a temporary speculative move.''
Merrill today cut its dollar prediction to $1.39 per euro for the end of March, from $1.33 before, and to 96 yen from a previous forecast of 100 yen in the same period.
The ECB is ``handcuffed,'' said Jason Daw, senior currency strategist in New York at Merrill, the world's biggest securities firm. ``In one sense, they say they're uncomfortable with the euro's strength, but on the other hand they say they are vigilant on inflation. That is a policy inconsistency, and the market is not going to take their verbal intervention seriously.''
`Against the Tide'
Kaoru Yosano, the LDP's head of policy, also said today ``the effect of intervention is extremely short-lived and limited,'' at a Tokyo press briefing.
Japan may not act to halt the yen's advance until it rises nearer to 100 per dollar, said Neil Mellor, a currency strategist in London at Bank of New York. ``There's no point swimming against the tide at the moment because they would get washed away.'' The yen may reach 100 by year-end, he said.
Hiroshi Watanabe, Japan's vice-finance minister for international affairs, told reporters in Berlin on Nov. 20 that the yen's gain ``was too rapid'' and that ``Japan will take decisive action if necessary.'' The ministry directs the central bank to buy or sell the currency.
`In a Box'
The euro rose even as German Chancellor Gerhard Schroeder said he was concerned about the currency's gains. He spoke before parliament today in Berlin. A stronger euro also has benefits in that it can suppress inflation and reduce the cost of crude oil, which is sold in dollars.
``The Europeans and the Japanese are in a box because the U.S. doesn't really seem to be too concerned,'' said Michael Malpede, senior currency analyst in Chicago at Refco Group Ltd. ``Some dollar weakness is good for everybody right now.''
Strategists including Todd Elmer at Barclays Capital Inc. in New York said tomorrow's Thanksgiving Day holiday in the U.S. may be an opportunity for Japan to make a larger impact with yen sales, as currency trading will be below the typical $1.9 trillion per day.
There are precedents for Japan selling yen on U.S. public holidays. Finance Ministry data show the Bank of Japan sold yen for dollars on Feb. 16, when U.S. financial markets were shut for Presidents' Day. Last year, Japan also sold yen on Jan. 20, when U.S. markets were closed for Martin Luther King Day.
Lowest Since 1995
Federal Reserve Chairman Alan Greenspan said on Nov. 19 at the European Banking Congress in Frankfurt that overseas investors may tire of financing the U.S. current-account gap and diversify into assets denominated in other currencies. ``A diminished appetite for adding to dollar balances must occur at some point,'' he said.
European officials' remarks are ``completely pushed aside when Greenspan speaks and alerts the market, saying the dollar's going down lads, so let's forget about it,'' said Adrian Hughes, a currency strategist at HSBC Holdings Plc in London, who bought the euro two days ago in a portfolio his team manages. He expects it to gain to $1.3350 by Christmas.
The Dollar Index, which measures the dollar against a basket of six currencies, fell to 82.37 today, the lowest since August 1995, according to data compiled by Bloomberg. The New York Board of Trade index averages exchange rates between the dollar and six other currencies, with the euro accounting for 58 percent.
The index's 1995 low was 80.05, the weakest for the dollar since 1992.
The dollar extended losses after a University of Michigan survey showed consumer confidence was lower this month than earlier estimated. The university's sentiment index was 92.8, compared with a reading of 95.5 reported Nov. 12, though still up from 91.7 in October.
Last Updated: November 24, 2004 12:24 EST
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