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Euro hits another record high against dollar

Euro hits another record high against dollar
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First Published: Wed, Sep 26 2007. 09 43 AM IST
Updated: Wed, Sep 26 2007. 09 43 AM IST
AFP
Tokyo: The euro struck another record high against the dollar in Asian trade on Wednesday, 26 September, on growing concerns that the world’s largest economy is losing steam, dealers said.
They said that another batch of sluggish data had sparked renewed speculation about possible further US interest rate cuts.
The euro reached $1.4162 in early Tokyo trade, the highest level since its introduction in January 1999.
By late morning it stood at $1.4145, up from $1.4135 in New York late Tuesday.
The dollar rose to 114.87 yen from 114.77 while the euro eased to 162.24 yen from 162.43.
The greenback stumbled in overseas trade as markets reacted to news that US consumer confidence slid to a near two-year low in September while sales of existing homes declined 4.3% in August.
The figures fanned jitters about the impact on the world’s largest economy of rising defaults in subprime mortgages to Americans with patchy credit histories, dealers said.
“Market sentiment toward the dollar is still very weak and overall trend is to sell the greenback,” said Marito Ueda, a currency trader at the FX Prime.
“The weak data overnight causes concern that the subprime housing loan problem might resurface,” he said.
The Conference Board of the US said its consumer confidence index fell to 99.8 this month, down from a revised 105.6 in August.
The confidence reading was sharply below Wall Street forecasts of 104.5 and was at its lowest level since November 2005.
The ailing US property market got more bad news as an industry report showed existing home sales fell 4.3% in August and that the glut of unsold properties rose further.
The figures stoked market speculation about possible further cuts in US interest rates by the Federal Reserve, which last week slashed its benchmark rate by half a point to 4.75%, dealers said.
ANZ senior currency strategist Tony Morriss said there is little to stop the dollar falling other than a technical correction.
“There’s been a significant change in the market’s dynamics with interest rate differentials moving away from the US dollar,” Morriss said.
He said the market remains data dependent though no matter what the numbers are the dollar is likely to fare poorly.
“If the data’s weak the dollar gets sold and if its strong then it doesn’t look like the dollar will rally that far,” Morriss said.
The yen showed little reaction to the formation of Japan’s new government after new Prime Minister Yasuo Fukuda kept the existing team of top economy and finance ministers.
“The market completely ignored the announcement of the cabinet. It’s what the new cabinet does in the future that matters,” Ueda said.
The yen may gain on the dollar as another interest rate rise by Bank of Japan is still possible by the year end, he added.
Traders will be keeping a close eye on Japan’s consumer prices, unemployment and other data due on Friday for leads on prospects of the Bank of Japan raising its super-low interest rates from 0.5%.
In one piece of bright news on Asia’s largest economy, the government said Wednesday that Japan’s trade surplus nearly quadrupled in August thanks to fast-growing exports to the rest of Asia and Europe.
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First Published: Wed, Sep 26 2007. 09 43 AM IST