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Finacial Times
Dollar slides to new lows as selling continues
By Jennifer Hughes in London Published: December 17 2003 10:22 | Last Updated: December 17 2003 17:34 Selling pressure on the dollar continued in thinning pre-Christmas trading conditions yesterday and the US currency slid to a series of new lows. The euro reached a high of $1.2418 in the New York day, after slipping to $1.2294 early in the European session. It was its twelfth such high in 14 trading days. "Its very much a familiar story on the foreign
exchanges as the euro stays in demand, the dollar remains unloved, and the yen
is somewhere in between, if only thanks to the ongoing fear of a slap from the
BoJ," said Paul Bednarczyk, currencies strategist at 4Cast economic
consultancy.
The dollar fell to SFr1.2514, its lowest against
the Swiss franc, since November 1996. Although the Swiss authorities are known
to want a weaker franc, they are believed to be less worried about strength
against the dollar than against the euro. "With euro-Swiss around SFr1.55
they're more than happy," said Mr Bednarczyk.
Sterling reached a high of $1.7656.
The dollar slid against the yen as general
bearishness overcame earlier gains based on reports that Japan would increase
its foreign exchange account funding to allow for more intervention this fiscal
year.
Since January when it resumed intervening, Japan
has bought about $168bn worth of dollars to limit the yen's
appreciation.
The dollar was at Y107.3 in New York, having risen
to Y107.86 earlier.
"Increased forex intervention in the new year would
be bullish for dollar-yen and euro-dollar, which would have to shoulder more of
the burden of the dollar's depreciation," said Monica Fan at Royal Bank of
Canada.
The euro made sharp gains against the Norwegian
krone after the central bank unexpectedly lowered interest rates.
The single currency jumped to NKr8.31, a two-month
high, from NKr8.2. The move, the bank's eighth cut in 12 months, lowered the key
rate by a quarter-point to 2.25 per cent.
The bank said its decision was based on concerns
about the low level of inflation and noted that the krone's recent strength
amounted to a de facto tightening of monetary policy.
Strategists said the move could spark further
weakness for the krone, and Monica Fan at Royal Bank of Canada forecast the euro
would rise to at least Nkr8.4 in the next quarter.
But strategists at SEB warned that the central bank
was playing a dangerous game.
"Norges Bank is telling the market that the foreign
exchange traders will decide the interest rate level," Tharald Laastad, currency
analyst at SEB in Oslo, who noted the sharp fall in interest rates from 7 per
cent a year ago. "They have started a battle against the currency, but they are
firing blanks."
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