LONDON, Nov 12: The dollar swung lower against other major currencies on Tuesday, sapped by concerns about the outlook for the US economy and corporate earnings, and signs Iraq may not play ball on tough new UN disarmament terms.
The single European currency rose to 1.0119 dollars from 1.0106 late on Monday in New York.
The dollar also eased to 119.41 yen from 119.60 on Monday.
We’re resuming the trend to dollar weakness, said HSBC currency strategist Mark Austin.
We would very much subscribe to the view that we’re seeing the second leg down in the dollar, he said, attributing the downtrend to the pressure of financial flows in the market.
Dealers were also mulling news that Iraq’s parliament had voted unanimously to reject a tough new UN resolution on disarmament, but to leave the final decision to President Saddam Hussein.
Iraq has until Friday to give its response to UN Security Council resolution 1441, which threatens “serious consequences” unless Saddam accedes to the new inspections regime and gives a full account of the current state of his arsenal.
Austin said: The fact that the Iraqi parliament has voted against the UN resolution I don’t think means very much because there’s only one vote that counts so we have to wait until Friday I think to see what the Iraqi decision will be.
He said the dollar was also pressured across the board by yen buying as dealers reversed short positions — the selling of borrowed shares in the hope of buying them back at a lower price at a later date.
Plus also there is very large US Treasury coupon bond payment on Friday of this week about $22 billion and the Japanese hold just under 17 per cent of US Treasuries.
So they will be receiving something towards four billion dollars of Treasury coupon payment and the story in the market is that certainly not all of that will be reinvested, some of it will be repatriated” thereby supporting the yen, he added.
Traders said the dollar’s near-term direction would also be affected by October retail sales data on Thursday.
The highlight of the euro-zone economic calendar was the German confidence index due to be published later Tuesday by the ZEW economic research institute.
The recent evidence on the outlook for the German economy makes it almost inevitable that business optimism will have fallen further and for the markets, the question is not whether the ZEW survey will fall but rather by how much,” said Commerzbank currency strategist Kamal Sharma.
The euro was changing hands at $1.0119 from 1.0106 late on Monday in New York, 120.83 yen (120.89), 0.6361 pounds (0.6365) and 1.4633 Swiss francs (1.4634).
The dollar was being quoted at 119.51 yen (119.60) and 1.4470 Swiss francs (1.4481).
The pound was at 1.5899 dollars (1.5870), 189.94 yen (189.94) and 2.3009 Swiss francs (2.2991).
On the London Bullion Market, the price of an ounce of gold firmed to $321.50 from 320.70 late on Monday.—AFP