Dollar Rally Takes A Breather
August 18, 2008
Market Scan
Dollar Rally Takes A Breather
By Parmy Olson
LONDON -
The dollar has taken a breather from its surprisingly rapid climb over the last two weeks, falling by more than 0.5% against the euro on Monday morning in Europe. Concerns about the euro zone's growth prospects persist, however, which could put further pressure on the continental currency.
The euro bought $1.473 on Monday morning in London, up from $1.468, late Friday in New York. The dollar had hit a six-month high against the euro earlier in the trading session. The dollar also fell against the British pound, which bought $1.866 on Monday morning in London, up from $1.863 on Friday, and against the Japanese yen, which bought $110.23 on Monday afternoon in Asia, up from $11.50 on Friday.
Currency traders consulted by Forbes.com said the slide in the dollar on Monday morning was a short-term correction to its recent rally, sparked by a rise in oil prices. Nomura analyst Peter Scullion said there was still a strong chance of the greenback continuing to build strength against the euro between now and the beginning of next year. "Some of the biggest macro funds will now be looking to establish long-dollar positions," he said. "We're going to see small periods like this where commodities and the oil price is a determinant factor on short-term moves on the dollar."
Crude oil rose for the first time in three days as a storm near Cuba prompted evacuations from rigs and platforms in the Gulf of Mexico, which account for about a fifth of U.S. production. Crude futures were up 68 cents, at $114.46, on Monday morning on the New York Mercantile Exchange, from $115.14 late Friday in New York. Copper for three-month delivery also jumped $80, to $7,440, on the London Metal Exchange on Monday morning.
Underpinning the dollar's recent rally have been growing concerns about the global economy. Last week, a spate of gross domestic product data showed that the economies of Germany and France had contracted in the second quarter. And on Sunday, the British Chamber of Commerce said there was a "distinct possibility" of the United Kingdom facing recession in the next six to nine months. (See "Recession Knocks On Europe's Door.") "With the latest indicators out of the United States, people are looking at signs of bottoming, whereas in Europe, it's just beginning its fall," said Scullion.
The iPath EUR/USD Exchange Rate (nyse: ERO - news - people ) exchange-traded fund, which provides exposure to the euro/U.S. dollar exchange rate, closed down 1.0%, or 56 cents, at $56.37, on the NYSE on Friday. It has fallen 7.2%, or $4.40, in the past month.
Source : www.Forbes.com
Dollar Rally Takes A Breather
By Parmy Olson
LONDON -
The dollar has taken a breather from its surprisingly rapid climb over the last two weeks, falling by more than 0.5% against the euro on Monday morning in Europe. Concerns about the euro zone's growth prospects persist, however, which could put further pressure on the continental currency.
The euro bought $1.473 on Monday morning in London, up from $1.468, late Friday in New York. The dollar had hit a six-month high against the euro earlier in the trading session. The dollar also fell against the British pound, which bought $1.866 on Monday morning in London, up from $1.863 on Friday, and against the Japanese yen, which bought $110.23 on Monday afternoon in Asia, up from $11.50 on Friday.
Currency traders consulted by Forbes.com said the slide in the dollar on Monday morning was a short-term correction to its recent rally, sparked by a rise in oil prices. Nomura analyst Peter Scullion said there was still a strong chance of the greenback continuing to build strength against the euro between now and the beginning of next year. "Some of the biggest macro funds will now be looking to establish long-dollar positions," he said. "We're going to see small periods like this where commodities and the oil price is a determinant factor on short-term moves on the dollar."
Crude oil rose for the first time in three days as a storm near Cuba prompted evacuations from rigs and platforms in the Gulf of Mexico, which account for about a fifth of U.S. production. Crude futures were up 68 cents, at $114.46, on Monday morning on the New York Mercantile Exchange, from $115.14 late Friday in New York. Copper for three-month delivery also jumped $80, to $7,440, on the London Metal Exchange on Monday morning.
Underpinning the dollar's recent rally have been growing concerns about the global economy. Last week, a spate of gross domestic product data showed that the economies of Germany and France had contracted in the second quarter. And on Sunday, the British Chamber of Commerce said there was a "distinct possibility" of the United Kingdom facing recession in the next six to nine months. (See "Recession Knocks On Europe's Door.") "With the latest indicators out of the United States, people are looking at signs of bottoming, whereas in Europe, it's just beginning its fall," said Scullion.
The iPath EUR/USD Exchange Rate (nyse: ERO - news - people ) exchange-traded fund, which provides exposure to the euro/U.S. dollar exchange rate, closed down 1.0%, or 56 cents, at $56.37, on the NYSE on Friday. It has fallen 7.2%, or $4.40, in the past month.
Source : www.Forbes.com
