From: valle (valle@SERVIDOR.UNAM.MX)
Date: Tue Jan 06 2004 - 15:37:26 EST
Euro reaches $1.28 against dollar
By Jennifer Hughes, Financial Times
Published: January 6 2004 10:57 | Last Updated: January 6 2004 17:55
Another day meant another low for the dollar against the euro - its twentieth in 25 trading days - and new troughs against a wide range of currencies.
The euro climbed above $1.28 to peak at $1.2812 in London afternoon trading before some profit-taking cooled the move. The single currency was at $1.276 by mid-session in New York, still up nearly a cent on the day.
"As long as we continue to make new highs and close above yesterday's levels, I'm not reading too much into the pull back," said Daniel Katzive, strategist at UBS.
Sterling reached another 11-year high at $1.8277, until profit-taking subsequently took it back to $1.822 by the end of the London day.
Momentum trading was the buzz-word on Tuesday as the market ignored weaker-than-expected eurozone service sector data and bid the euro higher, then later shrugged aside weaker US data as the dollar gained some ground.
"The market seems scared to book any profits for fear that we could go much further on the downside," said Kamal Sharma, currencies strategist at Dresdner Kleinwort Wasserstein.
Nick Parsons, head of currency strategy at Commerzbank, warned the market risked become disorderly - the key to the likelihood of central bank intervention - if the euro climbs above $1.2820, an important technical trend level.
"People are forecasting the euro at $1.40 but we won't get there in a straight line, whether that is through a technical correction or central bank coercion," he said.
Comments from eurozone officials yesterday showed little sign of incipient panic. Didier Reynders, Belgium's vocal finance minister, said the euro's move was "relatively reasonable".
The yen just managed another three-year high as the dollar slipped to Y106.3 before suspected intervention took the pair back to Y106.16, where it traded throughout the European day amid reports of Japanese banks stepping in at that level on the orders of the Bank of Japan.
"It's a very expensive way of intervening but Japan seems happy to write the cheques," said Mark Cliffe, global strategist at ING.
On Monday, the BoJ was believed to be behind the yen selling that took the dollar rapidly to Y107.36 from Y106.8. But the dollar's fall back below Y107 was as rapid as its rise - a worrying sign, said Derek Halpenny at Bank of Tokyo-Mitsubishi.
"It could well be an indication of the desperation building among Japanese exporters," said Mr Halpenny. Exporters would prefer a stronger dollar before repatriating their dollar earnings into yen - particularly with Japan's fiscal year-end in March looming - but there are fears the dollar's steady decline has spooked corporate treasurers to initiate far more aggressive hedging strategies, putting more pressure on the dollar.
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