LONDON, Sept 15: The dollar bounced back against the euro on Monday after suffering sharp falls in the wake of the Lehman Brothers bankruptcy declaration as anxious investors sought refuge in the US unit.
The single European currency in late-day trade was at $1.4168 against $1.4229 late Friday in New York. At one point, however, the euro jumped to $1.4481.
The US unit was weaker against the yen, at 106.12 yen after 107.92 on Friday.
Analyst Stuart Bennett of investment bank Calyon said the dollar’s slide earlier Monday in Asian trade may have been “a short-term reaction” reflecting investor unease at the collapse of Lehman brothers and sale of Merrill Lynch to Bank of America.But the dollar later strengthened as turmoil in the US financial sector prompted investors to take risk-averse positions that favoured the US currency.
“It is likely that the spike in risk aversion will fuel further de-leveraging and US repatriation flows, helping to provide some support for the dollar and limiting (the) downside for the dollar in the near-term,” said Lee Hardman of Bank of Tokyo-Mitsubishi.
Analysts noted that although the financial crisis originated in the United States, the dollar is still perceived as a refuge in times of turmoil, which explains its gradual strengthening against the euro since mid-July.
Investors also appear to believe that the US economy will be better able to withstand the impact of financial market unrest than those in Asia and Europe.
The dollar last Thursday soared to a 12-month high of $1.3882 against the euro on gloomy prospects for eurozone economic momentum.
A move by Federal Reserve policymakers at a meeting on Tuesday to lower US interest rates could in turn weaken the dollar.
But it could at the same time reassure investors that US authorities are prepared to intervene to stop the rot on financial markets, making the dollar more attractive, analysts said.
In London trade on Monday, the euro at 150.54 yen (153.55), 0.7917 pounds (0.7929) and 1.5913 Swiss francs (1.6074).
The dollar stood at 1.1218 Swiss francs (1.1293).
The pound was at $1.7920 (1.7940).
On the London Bullion Market, the price of gold climbed to $775 per ounce at the fixing from $740.75 late on Friday.
—AFP
