Dollar mixed amid fresh subprime worries
Tuesday, 6 November 2007
TOKYO, Nov 5 (AFP): The dollar was mixed in Asian trade Monday, rebounding from record lows against the euro despite renewed concerns over the fallout from a global credit squeeze, dealers said.
The euro edged down to 1.4487 dollars in Tokyo afternoon trade from 1.4504 in New York late on Friday, when it had earlier reached a record high of 1.4528.
The dollar fell to 114.57 yen after 114.65 while the euro slipped to 165.97 yen from 166.72.
The yen tends to benefit from increased risk aversion as it is often used to fund risky investments in higher yielding assets and currencies.
The dollar was close to a 26-year low against the British pound and a record trough against the Canadian dollar amid concern that major US banks may be sitting on bigger losses than previously believed from the subprime loan crisis.
The head of the biggest US bank, Citigroup, stepped down over the weekend as the group said it expected losses of up to 11 billion dollars related to problems in the subprime mortgage sector.
Credit worries overshadowed Friday's better-than-expected employment data as markets speculated about the chances of further interest rate cuts by the US Federal Reserve.
"A strong payrolls report for October didn't help the dollar as heightened fears of further major credit-related losses by US banks saw traders price in more Fed easing," wrote NAB Capital strategist John Kyriakopoulos in a note.
The world's largest bank Citigroup's dismissal of former chairman Charles Prince "fuelled fears that further credit related losses were in store and weighed on the US financial sector," added Kyriakopoulos.
The dollar gained on the euro as investors bet that the European Central Bank (ECB) will likely keep its key interest rate steady Thursday, dealers said.
"There is significant uncertainty in the market and on the economy that the ECB has to consider, including higher oil prices and a weak financial sector," said Thomas Lam, treasury economist at United Overseas Bank.
"I don't think the current backdrop warrants a rate hike."
Markets will pay close attention this week to remarks from Federal Reserve chairman Ben Bernanke to Congress Thursday after fresh worries about the impact of the US mortgage and credit woes rattled global markets this week.
The Fed last week cut its benchmark lending rate by 25 basis points to 4.5 per cent to try to cushion the economy from a housing slump, following a hefty 50-basis-point reduction in September.
The subprime mortgage crisis rocked financial markets in August as US homeowners with shaky credit histories defaulted on their loans, triggering a credit squeeze as major investors including banks struggled to cover losses.
Market players were also watching the latest political upheaval in Japan although the impact on the yen appeared to be limited, dealers said.
Japanese opposition leader Ichiro Ozawa resigned Sunday after his party rejected a proposal by the government to form a power-sharing coalition.
Against regional currencies, the dollar fell to 1.4494 Singapore dollars from 1.4525 Friday, to 32.38 Taiwan dollars from 32.41 and to 906.55 South Korean won from 906.65.
The euro edged down to 1.4487 dollars in Tokyo afternoon trade from 1.4504 in New York late on Friday, when it had earlier reached a record high of 1.4528.
The dollar fell to 114.57 yen after 114.65 while the euro slipped to 165.97 yen from 166.72.
The yen tends to benefit from increased risk aversion as it is often used to fund risky investments in higher yielding assets and currencies.
The dollar was close to a 26-year low against the British pound and a record trough against the Canadian dollar amid concern that major US banks may be sitting on bigger losses than previously believed from the subprime loan crisis.
The head of the biggest US bank, Citigroup, stepped down over the weekend as the group said it expected losses of up to 11 billion dollars related to problems in the subprime mortgage sector.
Credit worries overshadowed Friday's better-than-expected employment data as markets speculated about the chances of further interest rate cuts by the US Federal Reserve.
"A strong payrolls report for October didn't help the dollar as heightened fears of further major credit-related losses by US banks saw traders price in more Fed easing," wrote NAB Capital strategist John Kyriakopoulos in a note.
The world's largest bank Citigroup's dismissal of former chairman Charles Prince "fuelled fears that further credit related losses were in store and weighed on the US financial sector," added Kyriakopoulos.
The dollar gained on the euro as investors bet that the European Central Bank (ECB) will likely keep its key interest rate steady Thursday, dealers said.
"There is significant uncertainty in the market and on the economy that the ECB has to consider, including higher oil prices and a weak financial sector," said Thomas Lam, treasury economist at United Overseas Bank.
"I don't think the current backdrop warrants a rate hike."
Markets will pay close attention this week to remarks from Federal Reserve chairman Ben Bernanke to Congress Thursday after fresh worries about the impact of the US mortgage and credit woes rattled global markets this week.
The Fed last week cut its benchmark lending rate by 25 basis points to 4.5 per cent to try to cushion the economy from a housing slump, following a hefty 50-basis-point reduction in September.
The subprime mortgage crisis rocked financial markets in August as US homeowners with shaky credit histories defaulted on their loans, triggering a credit squeeze as major investors including banks struggled to cover losses.
Market players were also watching the latest political upheaval in Japan although the impact on the yen appeared to be limited, dealers said.
Japanese opposition leader Ichiro Ozawa resigned Sunday after his party rejected a proposal by the government to form a power-sharing coalition.
Against regional currencies, the dollar fell to 1.4494 Singapore dollars from 1.4525 Friday, to 32.38 Taiwan dollars from 32.41 and to 906.55 South Korean won from 906.65.