🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

FOREX-US dollar slides on China comments; risk appetite up

Published 06/26/2009, 04:13 PM
Updated 06/26/2009, 04:18 PM
WFC
-

* U.S. dollar falls as risk appetite rises

* Dollar weighed down by China comments, U.S. data

* US consumer spending, confidence show sign of improvement (Adds details, updates prices)

By Vivianne Rodrigues

NEW YORK, June 26 (Reuters) - The U.S. dollar fell broadly on Friday after China renewed its call for a super-sovereign reserve currency and as improving appetite for risk dented the greenback's safe-haven allure.

China's central bank on Friday did not mention the dollar by name but said it was a serious defect in the international monetary system that one currency should dominate.

Chinese officials have repeatedly expressed concern about the dollar's reserve status in recent months, and analysts have said the sheer size of Beijing's holdings of U.S. debt means such remarks are likely to continue to put pressure on the dollar.

"The Chinese own a tremendous amount of U.S. Treasuries," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. "They are obviously worried about inflation and losing value on their investments."

Still, analysts said an improvement in investor appetite for risk following a series of global liquidity measures this week also weighed on the dollar, which was on track to end the week on a softer note.

"An improvement in risk appetites is also a potential reason for today's dollar decline," Nick Bennenbroek, head of currency strategy at Wells Fargo Bank, said in a note. "While these types of comments (from China) are understandably undercutting the dollar ... there is no evidence of large scale selling of U.S. Treasuries as yet."

In late afternoon trading in New York, an index that measures the dollar's performance against six major currencies fell 0.7 percent to 79.826, just shy of a two-week low of 79.562 seen earlier this week.

The euro rose 0.6 percent to $1.4071, heading toward a two-week high of $1.4138 hit this week. Against the yen, the dollar slipped 0.7 percent to 95.20 yen.

Adding to the positive market sentiment, U.S. government data on Friday showed a larger-than-expected jump in personal income in May. Consumer spending, which accounts for over 70 percent of the country's economic activity, also rose in May.

A separate survey showed U.S. consumer confidence rose in June to the highest since February 2008, as expectations grew that the worst economic recession since the Great Depression may be ending.

"A pick-up in risk appetite yesterday weighed on the dollar and we are still seeing that sentiment impact flows today," said John Rivera, currency analyst at DailyFX.com in New York.

Elsewhere, however, traders remained cautious about more currency intervention by the Swiss National Bank to weaken its domestic currency against the euro and the dollar to protect the export-driven economy.

Data on Friday showed Switzerland's leading growth indicator, the KOF Swiss Economic Institute's economic barometer, rose to minus 1.65 points in June -- its first rise in two years -- beating forecasts of minus 1.76.

The euro fell 0.4 percent against the Swiss franc at 1.5257 francs. Broad dollar weakness helped dragged the U.S. unit down to 1.0822 francs, down 1 percent on the day.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.