Euro soars against US dollar
Pastor Dale Morgan
Euro soars against US dollar*
From correspondents in New York
November 25, 2006 11:56am
Article from: Agence France-Presse
THE euro soared against the US dollar overnight in volatile trading
which saw the euro surpass the $US1.30 mark, hitting the highest level
against the US currency since April 2005, traders said.
The euro was changing hands at $US1.3094 at 1900 GMT (0500 AEDT), up
from $US1.2948 dollars late on Thursday, but off an earlier high of
1.3109; the euro's highest mark against the dollar since April 21, 2005.
The euro also hit fresh highs against the Japanese yen, rising to
¥151.74, compared with ¥150.47 a day earlier.
The US dollar meanwhile was quoted at ¥115.59, down sharply from ¥116.25
late Thursday, and its lowest level against the yen since December 2004.
Traders said the US dollar had slumped heavily on the foreign exchange
markets for several reasons.
Some market-watchers said technical factors, such as a wave of automatic
dollar selling orders that were executed when the euro broke through the
$US1.31 level, had been partly responsible.
Others cited concerns about prospects for the US economy. Growth in the
world's largest economy slowed to an annual pace of 1.6 per cent in the
third quarter from 2.6 per cent in the second and a blistering 5.6 per
cent clip in the first.
The US economy has slowed markedly in recent months amid a widespread
housing market downturn.
"Having now reached these august levels the question facing the market
is ... what's next?" said Boris Schlossberg, a senior currency
strategist at Forex Capital Markets.
"Although, much like a snowball rolling down a mountain, these momentum
rallies can take a life of their own, we suspect that after some sober
post holiday analysis the markets may conclude that this move is a bit
overdone," Schlossberg said.
Many US traders were not at their desks Thursday due to the Thanksgiving
public holiday, and many took Friday off work as part of an extended break.
Most traders are now assuming that US interest rates have reached their
peak, at 5.25 per cent, and are not likely to rise any time soon,
another factor which could be deterring buying interest in the US dollar.
At the same time, interest rates appear to be on their way up in the
eurozone, where the benchmark level is expected to reach 3.50 per cent
in December and could go higher in 2007.
In addition, the deputy governor of the People's Bank of China, Wu
Xiaoling, appeared to suggest that holding the dollar as a reserve
currency might pose risks.
"The exchange rate of the US dollar, which is the major reserve
currency, is going lower, increasing the depreciation risk for east
Asian reserve assets," he was quoted as saying in an academic paper.
Traders said his remarks contributed to a buying spree in alternative
reserve currencies, particularly the euro.
In late New York trade, the US dollar stood at 1.2091 Swiss francs from
1.2237.
The pound was being traded at $US1.9319, up from $US1.9154 a day ago.