- LONDON (Reuters) - The euro
approached parity with the dollar on Wednesday as the U.S. currency nosedived
on yet another accounting scandal rocking U.S. stock markets and doubts
about Washington's foreign exchange policy.
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- The euro stormed as far as $0.9941 EUR= , up 1.5 percent
on the day and its highest level since February 2000 following U.S. telecoms
giant WorldCom's WCOM.O admission that it had inflated its profits.
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- Dealers said further dollar losses seemed likely as futures
markets were pointing to a bloodbath on Wall Street.
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- The greenback also fell to seven-month lows against the
yen despite repeated heavy selling of its own currency by the Bank of Japan.
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- "It's WorldCom, I don't think the stock market needed
any more bad news, we'd already had Fedex and Quantum reporting very bad
earnings," said Neil Parker, market strategist at RBS Financial Markets.
-
- The greenback was also down more than a percent against
sterling GBP= and the Swiss franc CHF= .
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- The U.S. administration so far appeared unconcerned with
the dollar's slide and dealers took that as a further reason to sell the
greenback.
-
- "The dollar will seek its level based upon market
forces, and based on whether or not our country can rein in spending, can
recover, can revitalize our manufacturing base," President Bush said
on Tuesday from the G8 summit in Canada.
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- BOJ INTERVENTION
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- Dealers said they were alert to the possibility that
the Bank of Japan could buy dollars again as Tokyo remains concerned that
yen strength was hurting its exporters. It also intervened earlier this
week.
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- "We took appropriate action in the foreign exchange
market today just as the day before yesterday," Haruhiko Kuroda, vice
finance minister for international affairs, told Reuters earlier.
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- The Bank of Japan, which acts as the agent of the Finance
Ministry, was detected intervening several times after initially buying
dollars around 120.20-120.30 yen in what dealers characterized as heavy
intervention.
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- They said the BoJ could have bought more than $4 billion.
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- Analysts said the scale of the dollar's fall could now
start to bother other central banks who will want to avoid the currency
move spilling into other markets.
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- "It's the speed which is going to bother central
bankers," said Parker.
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- Analysts said there was no possibility that the U.S.
Federal Reserve would raise interest rates when its policy making meeting
finishes later on Wednesday and it was likely that policy would remain
on hold for several more months than previously expected.
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- WORLDCOM REVELATION
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- The WorldCom revelation is seen as the latest example
of accounting irregularities in corporate America following the Enron debacle
and is set to raise more doubts over U.S. assets.
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- At 3:45 a.m. EDT, September Nasdaq futures NDU2 traded
on Globex had dropped 46 points and Dow Jones futures were down 225 points.
-
- "The futures are pointing to a very weak opening
and that's further pressure on the dollar," said Kamal Sharma, currency
strategist at Commerzbank.
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- PARITY
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- Dealers were preparing themselves for the euro to rise
above one dollar -- a key psychological level as its fall below there was
greeted with much fanfare by those who remained skeptical the single currency
project would ever work.
-
- The euro has now risen more than 11 percent against the
greenback this year, climbing nearly seven cents in June alone as worries
about the U.S. economic recovery have mounted and U.S. stocks have sunk
to lows not seen since the weeks following September 11.
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- Europe's single currency began trading on January 4,
1999, at $1.1747 but then declined steadily throughout its first year for
an initial breach of the $1.00 level that December.
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- It continued its fall to hit record lows around $0.8225
on October 26, 2000, down 30 percent from its starting level.
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- It is now 21.5 percent above that low but still 15 percent
below its launch rate.
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