U.S. dollar sees rally as risky deals avoided amid recovery concerns

In late morning trading here, the euro sank to 1.4876 dollars from 1.4922 late in New York on Thursday.

Against the Japanese currency, the dollar fell to 88.84 yen from 88.99 yen late on Thursday.

In London on Friday, the euro was changing hands at 1.4876 dollars against 1.4922 dollars late on Thursday, at 132.17 yen (132.78), 0.8988 pounds (0.8953) and 1.5125 Swiss francs (1.5116).

The dollar stood at 88.84 yen (88.99) and 1.0168 Swiss francs (1.0127).

The pound was at 1.6550 dollars (1.6661).

“Over the past few days, patches of weakness in economic data have seen fears over the strength and durability of the economic recovery return,” said NAB Capital strategist John Kyriakopoulos.

The Organization for Economic Cooperation and Development (OECD) on Thursday said the pace of recovery in the global economy would be “modest,” and forecast interest rates in the United States and Europe to remain “close to zero” until late 2010.

The Bank of Japan meanwhile wrapped up a monetary policy meeting Friday, leaving its key lending rate at 0.1 percent to fight stubborn deflation.

“Given that official concerns about deflation are intensifying, interest rates are unlikely to go up for a long while,” said Calyon analyst Mitul Kotecha.

“We only look for the first rate hike to take place in the second quarter of 2011.”

Everything happening in the currency market “can be explained by stock moves today,” added Koji Takeuchi, a senior economist at Mizuho Research Institute.

“Players were unwinding euro-holdings that they had accumulated in past weeks as falls in regional shares dented players' risk-tolerance.” Tokyo's benchmark Nikkei-225 index closed down 0.54 percent on Friday.

At its previous meeting last month, the BoJ announced it would halt some of its emergency measures to tackle the financial crisis at the end of the year.

But it is under pressure from the government not to tighten its highly stimulative monetary policy too soon.

Japanese Finance Minister Hirohisa Fujii expressed concern Friday about deflation, describing it as “worrisome.”

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email