|
Trade deficit second biggest ever Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=ajP2eRrJOdk8&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=ajP2eRrJOdk8&refer=home
Dollar Has Weekly Decline as Trade Deficit Widens, Oil Surges
Oct. 16 (Bloomberg) -- The dollar fell to a seven-month low against the euro this week as the U.S. trade deficit widened to the second biggest ever and oil surged to a record high, raising concern that economic growth may slow.
Demand for the U.S. currency also waned after the Federal Reserve Bank of New York's Empire State manufacturing index and the University of Michigan's gauge of consumer confidence declined more than forecast this month.
``A combination of a spike in oil prices, disappointing data and a record trade deficit all contributed to a generalized weakness in the dollar,'' said Alex Beuzelin, senior currency analyst at Ruesch International in Washington, which conducts $10 billion in foreign-exchange transactions annually.
Against the euro, the dollar fell 0.5 percent this week to $1.2467 in New York, according to EBS, an electronic foreign- exchange trading system. It weakened to as much as $1.2507 yesterday, the lowest since March 1, and broke out of its six- month range of $1.1761 to $1.2461. The dollar dropped 0.2 percent to 109.33 yen.
The declines came even as the Commerce Department yesterday said retail sales in September rose the most in six months.
``The numbers for the third quarter were good, and the dollar tried to rally for a few minutes,'' said Jesper Dannesboe, a currency strategist in London at Credit Suisse First Boston. ``People are looking to the fourth quarter, and the Empire index was weak. It tells you that people want to sell dollars.''
Greenspan on Oil
Oil prices aren't high enough to trigger inflation and slow growth like the U.S. experienced in prior oil shocks, Fed Chairman Alan Greenspan said yesterday. Crude oil futures yesterday rose to a record $55 a barrel on the New York Mercantile Exchange. The dollar remained lower after his remarks.
``The impact of the current surge in oil prices, though noticeable, is likely to prove less consequential to economic growth and inflation than in the 1970s,'' Greenspan said in the text of remarks to the National Italian American Foundation in Washington. ``The risk of more serious negative consequences would intensify if oil prices were to move materially higher.''
The dollar is down 2.4 percent versus the euro since Greenspan's Sept. 8 comment that crude prices ``no doubt'' contributed to slower growth in recent months.
The dollar's slide yesterday accelerated after it fell to $1.2440, a level where traders placed automatic, or stop-loss, orders to sell the dollar and buy the euro, said Adrian Schmidt, head of currency strategy at Royal Bank of Scotland Plc in London.
`Green Light'
``A close above $1.25 will be a green light to a lot of people who have been waiting to see which way the dollar would go,'' said Ian Gunner, head of currency strategy in London at Mellon Financial Corp., which manages $625 billion. ``People will be more confident putting money'' into the euro.
The dollar also fell this week against the British pound, Swiss franc and South African rand.
``Somebody decided to sell a lot of dollars,'' said Marvin Barth, global currency economist at Citigroup Inc. in London. They used yesterday's figures ``as an opportunity.''
In another sign of slowing demand for the U.S. currency, the dollar index, which measures the dollar's value against a basket of six currencies among the U.S.'s largest trading partners, fell for a third day yesterday to 87.02. The index includes the Swedish krona, Japanese yen, Canadian dollar, British pound, Swiss franc and the euro.
``It is just a matter of time before the dollar index falls to 84.56, which is its low for the year,'' said Nicole Elliott, a technical currency analyst in London at Mizuho Corporate Bank Ltd., a unit of Japan's biggest lender.
Retail Sales
The Fed's Empire factory index dropped to 17.4 from a revised 27.3 in September. The median forecast of economists in a Bloomberg poll was for a decline to 25. A separate report showed the University of Michigan's preliminary index for consumer confidence in October fell to 87.5 from 94.2. Economists forecast a reading of 94.0, based on the median estimate.
Retail sales in the U.S. rose 1.5 percent last month after a revised 0.2 percent decline in August, the Commerce Department said in Washington in a report released the same time as the Fed factory index. Excluding autos, sales jumped 0.6 percent. The median forecast of economists polled by Bloomberg was for an overall gain of 0.7 percent.
The trade deficit, the amount by which imports exceed exports, increased to $54 billion in August, the Commerce Department said Oct. 14. It was a record $55 billion in June. A larger deficit means more dollars need to be converted to other currencies to pay for imports.
Retail Sales 'Ignored'
``People went into these numbers viewing the dollar negatively after the trade deficit,'' said Marios Maratheftis, a currency strategist in London at Standard Chartered Plc. ``People seized on Empire State and largely ignored retail sales.''
U.S. economic growth will slow to 3.6 percent next year from 4.4 percent in 2004, according to the median of 63 forecasts in the latest Bloomberg monthly survey.
``For some people, there's a sense today's retail sales report will be the last good retail sales report we will see in a while and that from now on, the economy is going to soften a bit,'' said Robert Sinche, chief currency strategist in New York at Bank of America Corp.
In the euro region, growth averaged an annual 2.1 percent over the past four quarters and ``will continue at that pace,'' European Central Bank President Jean-Claude Trichet said in an interview in Berlin. Citing higher oil prices, he backed away from a forecast the expansion will accelerate next year.
Trichet said the euro's level is `appropriate'' after the currency retreated 4 percent from a record $1.2926 on Feb. 18.
|
|
