Euro steadies against 'safe-haven' dollar
Sunday, 11 November 2007
NEW YORK, Nov 10 (AFP): The euro held steady against the dollar here yesterday as fears about the depth of a credit crunch sent investors fleeing for traditional safe havens, strengthening the greenback and the yen.
The euro had jumped to a new high of 1.4752 dollars in early European trade, a day after the European Central Bank kept its key interest rate at 4.00 per cent and Federal Reserve chairman Ben Bernanke warned of deepening risks to the US economy.
The 13-nation currency later fell as low as 1.4632 dollars before edging up to 1.4677 around 2200 GMT, virtually unchanged from 1.4676 late Thursday in New York.
Both the euro and the dollar weakened against the Japanese currency. The euro fell to 162.43 yen from 165.22 late Thursday, and the dollar to 110.66 yen from 112.56.
In late New York trade, the pound was at 2.0901 dollars, down from 2.1073 late Thursday.
The dollar slipped to 1.1224 Swiss francs from 1.1277.
"The flat performance of the greenback is consistent with today's two key pieces of data relating to the United States' international trade," Patrick Fearon, an analyst at AG Edwards.
The US trade deficit in September fell to 56.5 billion dollars, its lowest level since May 2005, "and that is bullish for the US currency," he said, noting a separate report that showed October import prices jumped 1.8 per cent, partly due to the dollar's weakness.
Weak US consumer confidence figures released Friday also fueled speculation of a US interest rate cut.
US interest rates stand at 4.50 per cent after being cut by 75 basis points in two moves since September, making the dollar less attractive as an investment compared with the euro.
Rumours that British banks have sustained heavy losses as a result of the crisis in the US subprime mortgage sector-involving loans provided to homebuyers with poor credit histories -- have increased risk aversion, pushing the pound sharply off morning highs.
"The pound's dropped sharply due to speculation of large losses in the UK banking sector," said Steve Pearson, currency strategist at HBOS.
This in turn boosted the yen as increasingly cautious investors pull out of the risky carry trade, where they sell the Japanese currency to invest in higher-yielding ones.
The euro had jumped to a new high of 1.4752 dollars in early European trade, a day after the European Central Bank kept its key interest rate at 4.00 per cent and Federal Reserve chairman Ben Bernanke warned of deepening risks to the US economy.
The 13-nation currency later fell as low as 1.4632 dollars before edging up to 1.4677 around 2200 GMT, virtually unchanged from 1.4676 late Thursday in New York.
Both the euro and the dollar weakened against the Japanese currency. The euro fell to 162.43 yen from 165.22 late Thursday, and the dollar to 110.66 yen from 112.56.
In late New York trade, the pound was at 2.0901 dollars, down from 2.1073 late Thursday.
The dollar slipped to 1.1224 Swiss francs from 1.1277.
"The flat performance of the greenback is consistent with today's two key pieces of data relating to the United States' international trade," Patrick Fearon, an analyst at AG Edwards.
The US trade deficit in September fell to 56.5 billion dollars, its lowest level since May 2005, "and that is bullish for the US currency," he said, noting a separate report that showed October import prices jumped 1.8 per cent, partly due to the dollar's weakness.
Weak US consumer confidence figures released Friday also fueled speculation of a US interest rate cut.
US interest rates stand at 4.50 per cent after being cut by 75 basis points in two moves since September, making the dollar less attractive as an investment compared with the euro.
Rumours that British banks have sustained heavy losses as a result of the crisis in the US subprime mortgage sector-involving loans provided to homebuyers with poor credit histories -- have increased risk aversion, pushing the pound sharply off morning highs.
"The pound's dropped sharply due to speculation of large losses in the UK banking sector," said Steve Pearson, currency strategist at HBOS.
This in turn boosted the yen as increasingly cautious investors pull out of the risky carry trade, where they sell the Japanese currency to invest in higher-yielding ones.