Dollar Falls to 4-Yr Low Vs Euro
By Kazunori Takada
Monday 12 May 2003
TOKYO - The dollar tumbled to a four-year low against the euro on Monday as traders eager to sell the greenback jumped on comments from U.S. Treasury Secretary John Snow that a cheap dollar would help U.S. exports.
The U.S. currency has been steadily weakening in recent weeks on doubts about the outlook for the U.S. economy and due to lower U.S. interest rates compared with those of other currencies.
"The market is keen on selling the dollar and they would jump on anything they can," said Marshall Gittler, senior currency strategist at Deutsche Bank in Tokyo.
Snow, on a U.S. television program on Sunday, said: "When the dollar is at a lower level it helps exports, and I think exports are getting stronger as a result."
On another programme, Snow said Washington was committed to a strong dollar but that its value would be set by markets.
Takashi Toyahara, forex section manager at Nomura Securities, said that although Snow has made several different comments on the dollar, his latest remark on exports sounded the most honest.
Deutsche's Gittler agreed.
"I think they would be in favor of a controlled depreciation of the dollar but they can't say so outright, because if they did, it (the dollar) would collapse," Gittler said.
As of 0536 GMT, the euro was at $1.1562 after hitting a four-year peak of $1.1579 earlier and up from $1.1490 in late U.S. trade on Friday.
The single currency hit a record high against the yen, touching 135.49 yen before standing at 135.02, up from around 134.67 in New York.
Data from the Commodity Futures Trading Commission's Commitments of Traders report, released on Friday, showed that speculators had extended their net IMM euro futures long position to its largest since November 12, 2002 during April 30 to May 6.
Though such growing euro positions raised worries about overshooting, many think there is room for further gains.
Dollar bears reckon the euro will likely edge toward the record high of around $1.1886 traded shortly after its launch in January 1999.
"The next target for the euro would be $1.1745, where it first traded. A break above that could spark a further rise to around 1.18 or even 1.2," said a trader at a major Japanese bank.
Despite hefty losses against the euro, the dollar's slide versus the yen was curbed by wariness that Japanese authorities could intervene to stem the yen's rise.
Japan's top financial diplomat, Zembei Mizoguchi, warned that the yen's rise against the dollar was not warranted when looking at relative economic fundamentals.
The greenback was at 116.82 yen against 117.18 in late U.S. trade on Friday. It hit a 10-month low of 116 yen last week.
Talk swirled late last week that Japan had intervened recently, but the Finance Ministry declined to comment.
"The data the government recently announced showed they intervened on many days early this year so I think they could be in the market any time," said Shogo Nagaya, forex manager at Nomura Trust and Banking Corp in Tokyo.
Last week, Japan said it sold the yen for dollars and euros on 17 days in the first quarter of 2003, starting from January 15 when the dollar fell below 118 yen in the run-up to the U.S.-led war in Iraq.