Dollar Climbs vs. Yen, Ends Little Changed vs. Euro

By Jamie McGeever
25 September 2003 08:55 pm GMT

Dow Jones Business News   English
(c) 2003 Dow Jones & Company, Inc.


NEW YORK -- The dollar split its performance against its major counterparts Thursday, with a mixed bag of U.S. and euro-zone economic indicators contributing to a rather choppy but nevertheless muted session. In largely technical trading, the dollar ended slightly stronger against the yen, but slightly weaker against the major European currencies after recovering from new multimonth lows against the euro, sterling and Swiss franc. While the dollar avoided the heavy pounding it has taken since the Group of Seven communique last weekend, its respite may be fleeting.


"It's a dead-cat bounce," said Josh Levy, president of CMC Forex USA, an online foreign-exchange dealer, noting that compared to the losses it has posted over the course of the week, Thursday should be viewed as a period of temporary consolidation.


Late in New York trading Thursday, the euro was at $1.1501, up marginally from $1.1498 late Wednesday in New York. The dollar was at 112.04 yen, up from 111.66 yen late Wednesday. Against the Swiss franc, the dollar was quoted at 1.3428 francs, down from 1.3503 francs late Wednesday. Sterling was at $1.6613, up from $1.6595 late Wednesday.


A series of statistical releases on both sides of the Atlantic caused major currencies to spike and dip in choppy trading, particularly during the New York morning.

In the European session Thursday, the German Ifo index of business sentiment rose to 91.9 in September from 90.8 August, the fifth consecutive monthly increase. Although the current conditions component fell to 79.2 from 79.9, it was enough to help push the euro up through $1.15 to a new two-month high of $1.1537. But not for the first time this week, the single currency failed to hold above $1.15 for long and its inability to breach this key level decisively could prompt a temporary move back lower toward $1.1350, dealers say.


Meanwhile, sterling hit a new two-month high of $1.6634, and the dollar touched a new six-week low against the Swiss franc at 1.3413 francs.

On the U.S. data front Thursday, initial jobless claims for the week of Sept. 20 fell by 19,000 to a seven-month low of 381,000, coming in below the key 400,000 level for the first time in a month. But the data were impacted by Hurricane Isabel, which shut down many state government offices.


Less encouraging were durable-goods orders for August, which unexpectedly fell by 0.9%, compared with expectations for an increase of 0.7%. The previous month's increase, however, were revised up to 1.5%.


Positive August housing data offset disappointing figures on national business activity from the Federal Reserve Bank of Chicago. Existing-home sales rose 5.5%, with a 3.4% gain in new-home sales after downwardly revised 5.7% drop in July. The Chicago Fed National Activity Index fell in August to -0.28 from an upwardly revised +0.05 in July, as continued weak employment data and worsening economic output weighed on the index.


Meanwhile, Federal Reserve officials were again speaking about the U.S. economy.

In Honolulu, Dallas Fed President Robert McTeer said interest rates will likely remain low for some time, and the jobs picture remains cloudy. On business investment - the "missing ingredient" for the U.S. economic recovery - Mr. McTeer envisages a pickup soon, now that corporations are returning to profitability.


At a conference in Dallas, Boston Fed President Cathy Minehan also sounded upbeat on prospects for the economy, but noted the difficult situation in the labor market.

Meanwhile, St. Louis Fed President William Poole clarified in Moscow that he hadn't meant his comments Wednesday - that he didn't view the dollar's recent slide as a "sharp drop" - to be interpreted as a judgment on the dollar's exchange rate.


"I didn't intend to say anything about the current state of the dollar or its likely direction," he said, stressing that his comments didn't represent any new initiative by the Federal Reserve to influence the dollar's exchange rate.


"Dollar policy is determined by the Treasury, not the Federal Reserve," he stated.

Friday, Fed Chairman Alan Greenspan speaks in Washington D.C., though he isn't expected to address monetary-policy issues.


-By Jamie McGeever, Dow Jones Newswires; 201-938-2096;

Document DJON000020030925dz9p00013