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Latest
Special> Coping With the Global Financial Crisis> Latest
UPDATED: October 22, 2009
Dollar Falls Against Most Major Currencies
The dollar tends to fall against the euro and other higher-yielding currencies
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The dollar fell against most major currencies on Wednesday, hitting record low against the euro in 14 months, after encouraging corporate results boosted risk appetite.

The dollar rebounded on Tuesday as safety-haven demand picked up amid weak economic data. The U.S. currency resumed declines on Wednesday after some major banks reported better results for the third quarter. Morgan Stanley, the sixth-largest U.S. bank by assets, returned to profitability for the first time in a year on improved investment banking income. Wells Fargo posted a 2.6 billion dollars profit as its retail banking operations offset loan losses.

With risk sentiment remaining the main driving force in currency trading, the dollar tends to fall against the euro and other higher-yielding currencies on positive economic news. The euro breached the key 1.50 dollars level in early Wednesday trading, and climbed to a 14-month high of 1.5046 dollars later.

"This has enormous psychological significance," said Michael Woolfolk, a managing director at Bank of New York Mellon Corp. in New York. "It opens the way for further gains above 1.50 dollars, which is overwhelmingly market consensus."

It heightens concerns about the strength and sustainability of the euro-zone recovery, as a strong euro hurts export and investment environment for foreign companies.

If the euro stayed up around 1.50 dollars for an extended period or even climbed further, it could lead to increased concerns about the possibility of longer-term deflation in the Eurozone. This could ultimately prompt the European Central Bank (ECB) into cutting interest rates further, said Howard Archer, an analyst of Global Insight.

Henri Guaino, a top adviser to French President Nicolas Sarkozy, said on Tuesday that the euro at a level of 1.50 dollars is a disaster for European industry and the economy.

French Finance Minister Christine Lagarde, speaking to reporters after a meeting in Luxembourg of euro-zone finance ministers on Tuesday, said officials needed to remain "disciplined" in their message calling for a stronger U.S. currency. "We want a strong dollar; we need a strong dollar," Lagarde said.

ECB President Jean-Claude Trichet reiterated on Monday that excessive volatility in currencies is bad for economic development. According to minutes released on Wednesday, policymakers of the Bank of England were unanimous on its latest meeting to leave the size of asset purchase program unchanged at 175 billion pounds. The pound gained as the minutes showed that the central bank was less likely to make an extension of quantitative easing next month. The sterling was also helped by comments from the Bank of England Governor Mervyn King, who warned Britons to be prepared for interest rate rises.

"I do not know for how long interest rates will remain so low. But at some point they will return to more normal levels and it would be wise to take this into account in your financial planning," King wrote in a newspaper on Wednesday.

The euro bought 1.5036 dollars in late New York trading compared with 1.4928 dollars it bought late Tuesday. The pound rose to 1.6631 dollars from 1.6359 dollars.

The dollar fell to 1.0391 Canadian dollars from 1.0505 Canadian dollars, and fell to 1.0047 Swiss francs from 1.0129 Swiss francs. It rose to 91.06 Japanese yen from 90.74 Japanese yen.

(Xinhua News Agency October 22, 2009)



 
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