Dollar rises but outlook remains bearish
The dollar rose on Monday in a retracement from last week's steep losses but dealers said the bias for a weaker dollar remained intact.
With little on the U.S. economic calendar this week, dealers said the market was focused on the factors that have spurred heavy dollar sales in recent weeks, namely the gaping U.S. current account gap and the related issue of central banks' diversification of reserves away from the dollar, often to the benefit of the euro.
"They want to diversify and will continue to do so into the near future, so any rally in the dollar will be met by sellers coming out of the woodwork," said John McCarthy, director of foreign exchange trading at ING Capital Markets in New York.Dealers said only the threat of intervention, particularly by Japan, was lending the dollar support.
At midmorning in New York, the euro was down 0.13 percent at $1.3437, not far from record highs near $1.3460 achieved on Friday.The dollar rose 0.39 percent to 102.46 yen, more than a half yen over five-year lows hit last week.
Both the euro and the dollar rose against the Swiss franc after Swiss National Bank President Jean-Pierre Roth said weaker economic growth and high oil prices would prompt central banks to shy away from raising interest rates.
The dollar gained a half percent to 1.1365 Swiss francs while the euro rose 0.37 percent to 1.5278 francs.Sterling slipped 0.1 percent to $1.9418.
Dealers said the market was preoccupied on Monday with speculation over who would replace U.S. Treasury Secretary John Snow after the New York Times said President Bush had decided to replace Snow, possibly with White House Chief of Staff Andrew Card.
"The dollar has not rallied on the back of this discussion and to me that says the market's interpretation is that Card's appointment would be more of the same," said Lara Rhame, foreign exchange strategist at Credit Suisse First Boston in New York.
(From Reuters, Dezembro 06, 2004)
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