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novembro 08, 2004

Euro hits new high close to 1.30 dollars on deficit worries

The euro rose to a new record close to 1.30 dollars with analysts warning of gloomy prospects for the US currency as markets focus on the swelling US trade and budget deficits.

The single European currency reached a new all-time summit of 1.2987 dollars in early European trading.

The euro later stood at 1.2976 dollars, against 1.2970 dollars late on Friday in New York.

The dollar dropped to 105.41 yen from 105.50 on Friday.

Dealers are worried about how the United States will attract the necessary capital inflows to fund the deteriorating trade balance and budget deficit. The fear is that overseas investors might lose confidence in the debt-ridden US economy, placing their money elsewhere.

"The failure of the dollar to derive any support at all from the far stronger than expected employment report from the US on Friday points to a very grim outlook for the dollar in the near-term," said Derek Halpenny, analyst at the Bank of Tokyo-Mitsubishi.

"With the foreign exchange market now focused entirely on the problem of the US budget and current account deficits, there is a real risk that dollar selling becomes a crisis of confidence," he added.

Last month, Washington announced a record 2004 budget deficit of 413 billion dollars, while the trade deficit in August rose to 54 billion dollars, the second largest ever.

On Friday the euro smashed a previous all-time summit of 1.2929 dollars reached February 18.

The slump in the value of the dollar came despite news that the US labor market created a seven-month record of 337,000 new jobs last month.

"The price action highlights the renewed dominance of structural dollar negatives over cyclical dollar positives," ABN Amro analysts commented.

"With positive US data surprises not providing the dollar with support... further declines are very likely."

Against the yen, the dollar moved below 105.50, but dealers were wary of driving the Japanese currency much lower because of the threat of possible intervention by Japanese authorities, analysts said.

Market concerns about the ballooning US trade and budget deficits appear to have increased in the wake of US President George W. Bush's re-election win last week.

"Rising interest rate expectations on signs that recent oil price increases may not have the impact on consumer spending that was expected are being ignored due to growing concerns that four more years of President Bush will result in worsening budget and current account deficits," said Halpenny.

A steady rise in the euro is a cause of concern for European leaders, as the trend makes eurozone exports more expensive and less competitive and threatens what is already an uncertain economic recovery.

The euro was introduced in 12 countries -- Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain -- on January 1, 1999 in check form and as a virtual currency.

On January 4, 1999, its first day of trading, the euro changed hands for between 1.1745-1.1812 dollars.

It made its debut in the form of banknotes and coins on January 1, 2002 and fell to an historic low of 0.8230 dollars on October 26, 2002.

The euro was changing hands at 1.2976 dollars from 1.2972 late on Friday in New York, 136.78 yen (136.81), 0.6974 pounds (0.6982) and 1.5277 Swiss francs (1.5265).

The dollar stood at 105.41 yen (105.50) and 1.1773 Swiss francs (1.1767).

The pound was at 1.8608 dollars (1.8569), 196.16 yen (195.79) and 2.1906 Swiss francs (2.1836).

On the London Bullion Market, the price of an ounce of gold stood at 433.55 dollars against 431.00 late on Friday.

Publicado por esta às novembro 8, 2004 05:06 PM