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LONDON, Dec 24: The dollar extended losses in thin pre-holiday trade on Tuesday, setting a four-year low against the safe-haven Swiss franc as concerns of possible US-led action against Iraq kept flows out of the greenback.
Oil prices shot up to their highest in two years earlier in Asian trade, with a continuing oil industry strike in Venezuela adding to concerns about disruption to supplies.
This further escalated investor risk aversion, with investors seeking capital protection unwinding their high-risk carry trades and putting funds into low-yielding currencies with a large current account surplus.
Risk reduction, concerns about a war and a lack of faith in the US recovery are undermining not only the dollar but risk assets and risk currencies as well, said Paul Lambert, head of currencies at Deutsche Asset Management.
People are risk averse because of the prospect of a war. Before the war begins you never know what is going to happen. In these circumstances currencies with large balance of payments surplus tend to do well.
TOKYO: The dollar moved narrowly against major currencies in quiet trade on Tuesday amid a dearth of fresh leaders, with many players away for the Christmas holidays, dealers said.
The dollar fell briefly below the key 120-yen mark in New York on Monday, but it “will be unlikely that the yen will appreciate sharply in the next few days, said Kazuhiro Kaneko, a dealer at Trust and Custody Services Bank.
The yen was also pressured by caution over (yen-selling) intervention by the Japanese authorities, he said.
Tokyo is keen to prevent the yen from strengthening because it makes Japanese products less competitive abroad and lowers the value of overseas profits when repatriated.
Of course, market players are bearish about the dollar’s moves in the longer term due to concern over a military strike on Iraq, Kaneko added.
Military action was a matter of when rather than if, said Barclay’s Ito.
Japan’s trade data for November, which saw the surplus surge 80.9 per cent from a year earlier to 890.5 billion yen had no impact on currency rates, dealers said.
Dollar-euro trade is also static with market players gone for Christmas holidays, Kaneko said.
It’s Christmas Eve so there is no market at all, said a BNP Paribas dealer in Singapore. It’s a very tight range we are looking at.
Against the yen, the euro traded at 123.55, 123.58 in New York and 123.56 in Singapore.
In early afternoon Singapore trade, the dollar slipped to 1.73875 from 1.7402 on Monday, 1,200.94 South Korean from 1,202.54, 53.365 Philippine pesos from 53.44, and 42.9949 Thai baht from 43.065.
It was firmer at 8,897 Indonesian rupiah from 8,875 and 34.848 Taiwan dollars from 34.8375.—Reuters/AFP
