NEW YORK, Nov 22: The dollar weakened slightly on Friday, but came off its intraday lows against major currencies, as concerns about possible terror threats eased amid steady price action on Wall Street, analysts said.
The euro spiked briefly against the dollar earlier in the session, with traders linking the currency move to a report by a Saudi newspaper, Al-Majallah, detailing the possibility of an attack by February of next year.
The US government subsequently issued an advisory warning of al Qaeda’s “continued desire” to launch a terror attack on the American interests overseas. But it said the US terror threat level remains the same.
The dollar appears to have suffered mild damage from terrorist threats, given that there are no signs of panic in US stock markets, said Sean Callow, currency strategist at IDEAglobal in New York.
He also cited the euro’s mild recovery against the Swiss franc, a currency trade that reflects some abatement of risk aversion. Callow said the single European currency stabilized against the franc on Friday, after declines a day earlier following the explosions in Turkey, suggesting weariness but not panic.
The latest al Qaeda news followed rocket attacks on Friday that hit the Iraqi Oil Ministry and two Baghdad hotels used by foreign contractors and journalists a day after blasts in Istanbul killed 27 and wounded hundreds.
In late afternoon New York trade, the euro was up slightly against the dollar at $1.1912. Earlier, the dollar garnered bids against the euro after German Chancellor Gerhard Schroeder called for a stronger greenback.
The German official said both Germany and the United States have an interest in the recovery of the dollar, adding that he has yet to see evidence that the US government is leaning toward a weaker greenback.
The dollar also declined against the yen to 108.74 yen while the euro slipped against the Japanese currency to 129.58 yen. The dollar was down 0.1 per cent at 1.2974 Swiss francs.
Earlier, the dollar slipped a touch against the yen in spite of suspected yen-weakening intervention by Japan. That, traders said, helped put a floor under the dollar, which notched a new three-year low of 107.51 yen this week.
The bounce in the euro could be due to geopolitical tension and protectionism. This has been the market’s concern all week, said Eric Hiller, research co-head of liquid products including foreign exchange, at Bank of America in Chicago.
Earlier this week, the dollar sank on Washington’s announcement it would impose quotas on Chinese textile imports.
That development sparked fears that more protectionist US policies might slow economic growth.
In a move that could further escalate the brewing trade war against China, the US International Trade Commission on Friday voted to allow anti-dumping duties against $20 million worth of Chinese imports of iron pipe fittings.
Several Federal Reserve officials spoke on Friday, but had marginal impact on the market. The dollar reacted little to a speech by Atlanta Federal Reserve President Jack Guynn earlier on Friday, saying the U.S. economy appears to have entered a period of sustainable expansion.
Federal Reserve Vice Chairman Roger Ferguson said the United States’ excess capacity will keep US prices from soaring, suggesting low interest rates will remain for some time.
Minnesota Federal Reserve President Gary Stern echoed the same sentiment, saying in an interview with Reuters that inflation is unlikely to pick up next year, indicating that the Fed’s accommodative policy stance will remain in place for a long time.—Reuters