Jamie McGeever Dow Jones Newswires 28 January 2004
Wall Street Journal PAGE C4English
(Copyright (c) 2004, Dow Jones & Company, Inc.)
NEW YORK -- The dollar sank
across the board, hitting a 3 1/2-year low against the yen, with the catalyst
for the slide apparently a disappointing U.S. consumer-sentiment
The dollar was already
under selling pressure against the yen after Japanese Finance Minister Sadakazu
Tanigaki indicated that Japan might relax its
defense of the dollar. The euro, meanwhile, was rising fast on the back of
"an inordinate amount" of buying against the yen, said Josh Levy,
president of CMC Group, a currency-trading platform in New York.
Although the Conference
Board's confidence index for January rose to 96.8 from 91.7, its highest level
since the summer of 2002, it didn't meet market expectations. Dealers decided
to book profits from Monday's dollar gains and stop-loss sell orders were
tripped against a wide range of currencies.
"This was a
disappointing outcome relative to consensus expectations," wrote Ian
Morris, chief economist at HSBC in New York. Economists surveyed
by Dow Jones Newswires had anticipated a reading of 97.
"It was a little
worse than expected and people were [already] thrown by the less hard-line
stance of the Bank of Japan," said Lauren Germain, currency strategist at
Bank of America in New York.
Mr. Tanigaki had told
Parliament that Japan will continue take
action "against speculative moves in the market and to prevent exchange
rates from moving rapidly," but that authorities aren't aiming at
"guiding exchange rates to certain levels, or intentionally guiding the
this as a sign Japan accepts that its
intervention can only smooth the dollar's decline, not reverse it. In late trading in New York, the dollar was at
105.64 yen, down from 106.33 yen late Monday in New York. It traded as low as
105.47 yen yesterday, a level last seen in September 2000. The euro was at
$1.264, up from $1.2471 in New York late Monday and at
133.50 yen from 132.60 yen.
The dollar was at
1.2404 Swiss francs, down from 1.2571 francs in New York late Monday. Sterling shrugged off political
jitters surrounding British Prime Minister Tony Blair, climbing to $1.8277 from
$1.8138 late Monday. Most of the sharp swings were in the U.S. morning session
shortly after the consumer index was published at Sterling was also influenced by
economic developments in Britain. Already strengthening
amid the market's broader dollar selloff and a growing belief the Bank of
England will raise interest rates next week, the pound got another leg up after
Bank of England Governor Mervyn King said that on a trade-weighted basis,
sterling has been "remarkably stable" recently. This triggered
stop-loss buying above $1.8250, said a dealer at a British bank in New York, and helped to
overshadow a coming parliamentary vote on student tuition fees. By a slender
majority of only five votes, Mr. Blair managed to avoid what would have been
his first parliamentary defeat since sweeping to power in 1997.
Other currencies, such
as the Canadian, New Zealand and Australian dollars, also appreciated, with the
Australian dollar coming within a whisker of reaching a six-year high above
78.14 U.S. cents.
Dealers are now turning
their attention to the Federal Reserve's interest-rate decision today. Most
observers expect policy makers will leave rates on hold at a 46-year low of 1%,
with no hint increases are likely in the near term. The meeting is expected to
produce a policy statement much like the one released when the central bank
last met in early December.