Dollar slumps to 15-month euro low (AP)
NEW YORK (AP) — The dollar slid to a 15-month low against the euro Wednesday as investors fled the safe haven currency on upbeat U.S. economic reports, while markets absorbed the U.S. Federal Reserve’s indication that interest rates will remain at super-low levels for a while yet and that it was not overly concerned by the U.S. currency’s decline.
The 16-nation euro climbed to $1.5077 in early New York trading from $1.4975 late Tuesday, having earlier risen to $1.5096, its highest level since August 2008. The dollar fell to 87.56 Japanese yen from 88.56 yen, after earlier falling to 87.36 yen, its weakest level since January and close to 14-year lows.
The renewed slump in the dollar was driven largely by the publication Tuesday of the minutes to the Fed’s last rate-setting meeting on Nov. 3-4.
The Fed said at the time that it plans to keep interest rates at “exceptionally low levels” for an “extended period” — currently the Fed funds rate stands at a range between zero and 0.25 percent — and that the fall in the dollar had been “orderly.”
Currency traders seized on the reference to the dollar as the Fed is usually wary of talking about changes in currency values.
Stuart Bennett, senior foreign exchange strategist at Calyon Credit Agricole, said there’s now a chance that the euro’s breakthrough opens the way for a “rapid” move higher, especially if stocks remain well-bid — for much of the past year, the dollar has moved in opposite direction to stocks.
Bennett also said traditional interest rate differences are likely to underpin further euro gains. Though investors don’t expect either the Fed or the European Central Bank to raise interest rates any time soon, the consensus is that the ECB will move first when the time comes — the benchmark rate in Europe stands at 1 percent, already giving the euro a modest interest rate advantage.
“Risk remains the key driver for foreign exchange markets, but rate differentials are becoming more relevant,” said Bennett.
On Wednesday, the Labor Department reported a drop in unemployment claims to the lowest level of the year last week. The Commerce Department, meanwhile, said sales of new homes rose last month to the highest level in more than a year, and consumer spending rose a brisk 0.7 percent last month — after a 0.6 percent drop in September.
Orders for expensive manufactured goods, however, dropped for the first time since August.
Though many traders and analysts think the dollar has further to fall, they are well aware that the upcoming year-end may start to complicate matters as investors look to lock in profits made over the last 12 months by selling euros.
Neil Mellor, currency strategist at Bank of New York Mellon, noted that before the crisis, the euro took almost two years to accrue the same gains it has made against the dollar since March. That increases the likelihood that investors will cash in, potentially aggressively, at some point.
The euro started the year around the $1.35 mark and soon fell to around $1.25 amid the deepening economic gloom, but once the stock markets started to rally in March investors started selling the dollar aggressively.
Mellor said that next week could be key for how markets close out the year.
“The temptation for investors to lock in the solid gains that were denied them last year may be beginning to grow,” said Mellor.
Also on Wednesday, Ric Battellino, the deputy governor of the Reserve Bank of Australia, said the Australian economy had entered a “new upswing” and that growth would continue for a “few more years yet.” The Australian dollar rose to 92.71 U.S. cents from 92.04 cents late Tuesday, having earlier risen to a high of 93.03 cents.
In other early trading, the dollar fell to 1.0487 Canadian dollars from 1.0577, and slid to 1.0019 Swiss francs from 1.0082 francs.
Pylas reported from London. Julia Marshall in London contributed to this report.
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Dollar slumps to 15-month euro low (AP)






