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Dollar nears record lows bond sink { November 19 2004 } Original Source Link: (May no longer be active)
http://money.cnn.com/2004/11/19/markets/bondcenter/bonds/http://money.cnn.com/2004/11/19/markets/bondcenter/bonds/
Dollar near record lows, bonds sink
Greenback extends losses on deficits, Treasuries hit by Greenspan inflation remarks.
November 19, 2004: 1:01 PM EST
NEW YORK (CNN/Money) - The dollar slid across the board and bonds fell sharply midday Friday, following remarks made by Federal Reserve Chairman Alan Greenspan on inflation, the U.S. trade deficit and the federal budget deficit.
Around noon Friday, the dollar was close to breaking all-time lows against the euro, with the euro buying $1.3060, up from $1.2963 late Thursday. The greenback hit a record low against the euro in intraday trading Thursday, with the euro buying $1.3074.
The dollar also sank against the yen, buying ¥102.85, down from ¥104.23 late Thursday.
In a speech in Frankfurt, the Fed chief said the U.S. budget deficit cannot widen indefinitely at its current pace, and that the size of the trade gap implies that foreign investors' appetite for U.S. assets will likely cool at some point.
"It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point," Greenspan said.
Greenspan warned that if the U.S. did not deal with these two issues -- also cited as the main causes of the weak dollar -- the country could run into economic problems down the line.
Most dollar watchers expect the currency to remain under pressure as long as the market focuses on the U.S. trade deficit, believing that Washington wants a weaker dollar to close the gap and will therefore refrain from intervening to support the greenback.
A stream of positive U.S. economic data has been largely ignored as currency traders focus on long-term factors that are hurting the dollar, including the wide U.S. current account deficit.
U.S. Treasuries prices dropped sharply after Greenspan said investors should be hedged for higher interest rates.
The benchmark 10-year note fell 21/32 to 100-13/32 to yield 4.20 percent, up from 4.12 late Thursday. The 30-year bond lost one point to 107-12/32 to yield 4.87 percent, up from 4.81 late Thursday.
The two-year note fell lower 5/32 to 99-5/32 to yield 2.95 percent, and the five-year note lost 14/32 of a point to 99-22/32 to yield 3.57 percent.
At the conference in Frankfurt, the Greenspan said rising rates had been advertised for so long that anyone who had not hedged by now was "desirous of losing money."
The market took that as a warning of more rate hikes to come and Treasuries sold off.
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