- (Bloomberg) -- The dollar had its biggest decline against
the euro in a week on concern the U.S. won't attract enough capital to
narrow its record current account deficit, even as the economy expands
at the fastest pace since 1984.
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- The dollar failed to rally after government and industry
reports showed durable goods orders in the U.S. rose, jobless claims fell
and an index of Chicago-area factory activity rose to the highest in almost
nine years. In contrast to the U.S., the euro region's current account
surplus widened in September, the European Central Bank said today.
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- "Traders don't feel comfortable sleeping at night
with a big long dollar position,'' said Shahab Jalinoos, a currency strategist
at ABN Amro Holding NV in London.
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- In New York trading, the dollar fell to $1.1935 per euro
at 1:52 p.m. from $1.l792 late yesterday. The dollar is down 14 percent
versus the euro this year and today dropped against all but three of 16
major currencies tracked by Bloomberg News.
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- The U.S. dollar index, which tracks the dollar compared
with a basket of six currencies, fell to 90.58 from 91.46. The index has
shed 11 percent this year. In other trading, the yen rose against the dollar
after Merrill Lynch & Co. raised its forecasts for the Japanese currency.
Gold rose.
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- The U.S. current account, the broadest measure of trade
and investment, was $138.7 billion in the second quarter, the most recent
figures available. By contrast, Europe's surplus widened to 7.7 billion
euros in September, the ECB said today. Japan also has a surplus.
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- Deficits
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- "Clearly the growth story is not motivating foreign
exchange markets,'' said John McCarthy, director of foreign exchange trading
at ING Financial Markets LLC in New York. ``The more broad-based macroeconomic
issues of deficits here and general concern about fiscal issues here, in
particular with the Middle East, are going to be with us for a while.''
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- Tax cuts, increases in military spending and a growing
need to fund social programs associated with an aging population are widening
the U.S. budget deficit. Wall Street firms including Merrill have forecast
the gap will be a record $600 billion in the fiscal year starting Oct.
1, from $374 billion a year earlier.
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- In a move that may add to the deficit, the U.S. House
of Representatives approved a $395 billion Medicare bill to help the elderly
afford prescription drugs.
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- Thanksgiving Holiday
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- Traders are also reluctant to buy the dollar before the
Thanksgiving holiday in the U.S. on concern the U.S. and its allies will
be the target of terrorist attacks, said Jay Bryson, global economist at
Wachovia Corp. in Charlotte, North Carolina.
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- "Nobody wants to go into this holiday weekend long
dollars,'' said Bryson. 'It's a flight away from the U.S.''
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- Britain's Foreign Office yesterday warned that further
attacks may be "imminent'' in the Turkish cities of Istanbul and Ankara.
Twenty-nine people died in Nov. 20 attacks on the British consulate and
the Turkish headquarters of HSBC Holdings Plc. A week earlier, two synagogues
in Istanbul were bombed.
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- Markets in the U.S., which the Bank for International
Settlements estimates accounts for 16 percent of global foreign exchange
trading, will be closed Thursday for the holiday.
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- U.S. gross domestic product expanded 8.2 percent in the
third quarter, the Commerce Department said yesterday. That compared with
a previous estimated of 7.2 percent reported on Oct. 30.
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- "The figures coming out of the American economy
are very positive,'' Mervyn Davies, chief executive officer of Standard
Chartered Plc, said at a British Chamber of Commerce luncheon in Hong Kong.
``Everyone hopes that will continue, but we have seen a marked deterioration
and weakness in the dollar.''
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- Standard Chartered was the most accurate forecaster of
exchange rates in the third quarter among 56 companies surveyed by Bloomberg
News. Davies said he expects the dollar to extend its slide. It fell to
a record low of $1.1980 per euro last week.
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- Volkswagen Hurt
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- "The euro won't weaken against the dollar,'' Bernd
Pischetsrieder, chief executive officer of Volkswagen AG, said in a televised
interview with Bloomberg News. "Whether it's $1.15 or $1.25, it won't
come back to parity.'' The euro's advance will contribute to a decline
in U.S. sales next year, he said.
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- Orders for durables, or items made to last at least three
years, rose 3.3 percent in October, following a 2.1 percent gain in September,
the Commerce Department reported in Washington. Economists expected a 0.7
percent rise, the median estimate in a survey of economists by Bloomberg
News prior to the report.
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- Applications for initial unemployment insurance fell
to 351,000 in the week ended Saturday, as companies retain and add workers
in an expanding economy, the Labor Department reported. The claims were
lower than the revised 362,000 of the prior week and were the lowest since
339,000 for the Jan. 20, 2001 week.
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- Merrill Forecast
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- Against the yen, the dollar weakened to 109.12 from 109.40.
Merrill said in a report that it expects the yen to strengthen more against
the dollar in 2004 than it previously forecast as the Japanese economy
pulls out of a 12-year slump.
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- The Japanese currency will end next year at 90 per dollar,
that's stronger than a earlier prediction of 98. Merrill, in a note to
investors, also said it predicts the pound will advance more than previously
estimated against the U.S. currency.
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- The pound will trade at $1.77 in March, up from a forecast
of $1.67. By September, the U.K. currency will strengthen to $1.85, up
from a prediction of $1.66.
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