🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

FOREX-Dollar holds near 14-month low vs euro

Published 10/19/2009, 08:56 AM
Updated 10/19/2009, 09:03 AM
CSGN
-
SOGN
-

* Dollar struggles, euro not far from 14-month high

* Analysts say Fed thought likely to keep rates low

* Market watches euro zone meeting for FX comments (Updates prices, adds comment, detail, changes byline, dateline, previous LONDON)

By Steven C. Johnson

NEW YORK, Oct 19 (Reuters) - The dollar remained near a 14-month low against the euro on Monday as investors bet the Federal Reserve will hold U.S. interest rates near zero well into next year.

The euro traded within half a cent of $1.50, a level not seen since August 2008, though analysts said investors would be on alert for any comments about excessive euro strength from a euro zone finance ministers' meeting later in the day.

Investors fear a sluggish recovery in the United States and still rising unemployment will dissuade the Fed from lifting interest rates quickly. That would diminish the dollar's appeal and heighten that of higher-yielding currencies.

The commodity-sensitive Australian and New Zealand dollars both neared multimonth highs against the greenback Monday as European stocks soared and optimism about U.S. corporate earnings had Wall Street poised to open higher.

"The trend clearly is for a weaker dollar due to a lack of interest rate support," said Marcus Hettinger, global currency strategist at Credit Suisse in Zurich.

Brown Brothers Harriman strategists said Fed Chairman Ben Bernanke is likely to suggest in a speech on Monday that benchmark U.S. rates will be on hold for a while yet.

The euro rose as high as $1.4956 but eased to $1.4924 early in New York, up 0.1 percent from late Friday. But if stock markets rise further, it may test the psychologically important $1.50 level before the day is through, said Peter Frank, strategist at Societe Generale in London.

"The stock market is stronger and more risk appetite seems to be driving things," he said.

Traders were on the lookout for possible remarks on euro strength and dollar weakness at a gathering of euro zone finance officials in Luxembourg, although analysts said the group was unlikely to significantly talk down the euro.

On a trade-weighed basis, the euro jumped to 118.82 on Friday, close to historic highs. The euro has appreciated nearly 7 percent against the dollar this year.

YEN STEADY, AUSSIE RISES, STERLING DIPS

The dollar was down 0.1 percent at 90.85 yen after falling below 89 yen last week. It was 0.4 percent lower at 1.0148 Swiss francs. The Australian dollar rose 0.5 percent to $0.9206, near a 14-month peak, after a central bank official said a return to normal monetary policy was appropriate.

The Reserve Bank of Australia raised rates to 3.25 percent this month, the first major central bank to hike rates since the global economic crisis began.

Sterling slipped 0.2 percent to $1.6326 after a Bank of England official said the central bank should continue its asset-buying program because the economy has yet to recover.

The Fed has also been buying assets such as mortgage-backed debt, and some analysts said it could lend the dollar modest support by winding down those purchases while still holding rates near zero.

"Such a move would steepen the yield curve and make the dollar more attractive versus the yen on an interest rate differential basis, possibly pushing the pair to 95 yen," said Boris Schlossberg, research director at GFT Forex in New York. (Additional reporting by Jessica Mortimer in London; Editing by James Dalgleish)

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.