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Market Review - 07/11/2007 21:50 GMT
Dollar falls to record low versus euro on China’s reserve diversification talk
The single currency rallied to a fresh record high of 1.4731 versus the greenback on talk that China may diversify its US$ 1.4 trillion of forex reserves into other strong currencies such as the euro. The British pound also rallied to a 26-year high of 2.1072 on Wednesday.
Cheng Siwei, Vice chairman of the Chinese People's Political & Consultative Conference which is parliament's top advisory body, said China should take advantage of the strengthening euro to compensate for weakening currencies, however, Cheng later commented his statement of diversification should not be construed as suggesting that Beijing would buy more euros.
St. Louis Federal Reserve President William Poole said further interest rate cuts might be needed if problems in the housing market spread further. Poole said the ongoing decline in the housing market would likely have a ‘modest’ impact on U.S. economic growth but the risk of a bigger impact could not be discounted. The U.S. stocks extended decline after his remarks and Dow Jones closed down 361 points on Wednesday.
The greenback fell sharply against the Japanese yen from 114.79 to 112.61 on active unwinding in carry trades due to the selloff in U.S. stocks. Euro, aussie and sterling tumbled versus the Japanese unit from 167.65 to 164.80, 107.16 to 104.74 and from 239.64 to 236.91 respectively. The dollar index touched a record low of 75.077, down around 10 percent since the start of 2007 before rebounding later in the day.
The single currency pared some of the gains on profit-taking and cross selling in euro as French President Nicolas Sarkozy told a joint session of the U.S. Congress in Washington that the Bush Administration must stem the dollar's plunge or risk triggering a trade war.
U.S. currency fell to a multi-year low of 0.9059 versus the Canadian dollar as crude oil prices and gold rose to a record $98.62 a barrel and a 27-year high of 845.60 respectively. However, the greenback rebounded strongly later in the day to 0.9308 on profit-taking together with the retreat in commodity prices.
Australian dollar rallied to 0.9401 against the U.S. currency, the highest since 1984, after the Reserve Bank of Australia raised interest rates by a quarter-percentage point to an 11-year high of 6.75%. However, the pair retreated to around 0.9269 later in the day due to profit taking together cross unwinding in aussie especially versus the Japanese yen. New Zealand dollar advanced to 0.7893 versus the U.S. currency before retreating strongly to 0.7772 later in the day.
Thursday will see the release of Japan’s economic watch, German trade balance and current account, U.S. jobless claims and U.K. leading indicators. The European Central Bank and the Bank of England are expected to keep their interest rates unchanged at 4% and at 5.75% respectively.
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Market Review - 07/11/2007 21:50 GMT
Dollar falls to record low versus euro on China’s reserve diversification talk
The single currency rallied to a fresh record high of 1.4731 versus the greenback on talk that China may diversify its US$ 1.4 trillion of forex reserves into other strong currencies such as the euro. The British pound also rallied to a 26-year high of 2.1072 on Wednesday.
Cheng Siwei, Vice chairman of the Chinese People's Political & Consultative Conference which is parliament's top advisory body, said China should take advantage of the strengthening euro to compensate for weakening currencies, however, Cheng later commented his statement of diversification should not be construed as suggesting that Beijing would buy more euros.
St. Louis Federal Reserve President William Poole said further interest rate cuts might be needed if problems in the housing market spread further. Poole said the ongoing decline in the housing market would likely have a ‘modest’ impact on U.S. economic growth but the risk of a bigger impact could not be discounted. The U.S. stocks extended decline after his remarks and Dow Jones closed down 361 points on Wednesday.
The greenback fell sharply against the Japanese yen from 114.79 to 112.61 on active unwinding in carry trades due to the selloff in U.S. stocks. Euro, aussie and sterling tumbled versus the Japanese unit from 167.65 to 164.80, 107.16 to 104.74 and from 239.64 to 236.91 respectively. The dollar index touched a record low of 75.077, down around 10 percent since the start of 2007 before rebounding later in the day.
The single currency pared some of the gains on profit-taking and cross selling in euro as French President Nicolas Sarkozy told a joint session of the U.S. Congress in Washington that the Bush Administration must stem the dollar's plunge or risk triggering a trade war.
U.S. currency fell to a multi-year low of 0.9059 versus the Canadian dollar as crude oil prices and gold rose to a record $98.62 a barrel and a 27-year high of 845.60 respectively. However, the greenback rebounded strongly later in the day to 0.9308 on profit-taking together with the retreat in commodity prices.
Australian dollar rallied to 0.9401 against the U.S. currency, the highest since 1984, after the Reserve Bank of Australia raised interest rates by a quarter-percentage point to an 11-year high of 6.75%. However, the pair retreated to around 0.9269 later in the day due to profit taking together cross unwinding in aussie especially versus the Japanese yen. New Zealand dollar advanced to 0.7893 versus the U.S. currency before retreating strongly to 0.7772 later in the day.
Thursday will see the release of Japan’s economic watch, German trade balance and current account, U.S. jobless claims and U.K. leading indicators. The European Central Bank and the Bank of England are expected to keep their interest rates unchanged at 4% and at 5.75% respectively.
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