WSJ: WORLD FOREX: Dollar Slips Back As Market Mood Improves
LONDON (Dow Jones)--With U.S. payrolls and the G20 summit out of the way and the International Monetary Fund suggesting the dollar has further to fall, the U.S. currency is back under selling pressure in Europe Monday.
The decline has taken the euro back up close to $1.50 as investors once again show a preference for risky assets.
Equity markets have been big winners with most global markets posting gains.
Friday's news that U.S. non-farm payrolls fell more than expected and that the unemployment level in the U.S. rose to its highest level in 26 years initially helped the dollar.
U.S. stocks, which would normally have been disappointed, remained firm with the Dow Jones Industrial Average gaining 0.2% on the day.
The meeting of finance ministers from the Group of 20 industrialized and developing nations over the weekend in Scotland also proved uneventful for financial markets. The group failed to mention currencies at all in their final communique.
More direction appeared to come from comments by U.S. Treasury Secretary Timothy Geithner and U.K. Prime Minister Gordon Brown, who warned against ending financial crisis support programs prematurely. In other words, there won't be any rush to tighten monetary policy.
This, rolled in news that Moody's raised the outlook for China's A1 rating to positive from stable, that Australian housing finance approvals increased by a sharp 5.1% in September and that the price of gold hit a new record high just over $1,100/oz, all contributed to a rise in global optimism.
Equities in Asia rallied with the Nikkei gaining 0.2% and the Shanghai Composite Index rising 0.4%. In Europe, most bourses also started higher with the indexes gaining as much as 1.0% or more soon after opening.
The IMF added to dollar's woes by commenting that although the dollar has "moved closer to medium-run equilibrium," it continues to trade "on the strong side."
Although some analysts reckon that the dollar should remain in fairly narrow trading ranges now, others suggest that the U.S. currency could come under renewed, heavy selling pressure if Fed officials speaking this week suggest that rates will stay low for longer because of the weak payrolls.
"Any signals that the weaker data could prolong the period over which the policy rate remains 'exceptionally low' could heap further pressure on the dollar," said Gareth Berry, a currency strategist with UBS in Singapore.
By 1030 GMT, the dollar had slipped back from an earlier high of Y90.28 to trade at Y89.91, hardly changed from Y89.96 late on Friday in New York, according to EBS.
The euro rose to $1.5000 from $1.4844 and to Y134.85 from Y133.53.
The dollar was down at CHF1.0071 from CHF1.0177 while the pound bounced up to $1.6826 from $1.6608.
-By Nicholas Hastings, Dow Jones Newswires; 44 20 7842 9493; nick.hastings@dowjones.com
