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Dollar stable but sick { May 12 2003 } Original Source Link: (May no longer be active)
http://money.cnn.com/2003/05/12/markets/bondcenter/dollar_update/http://money.cnn.com/2003/05/12/markets/bondcenter/dollar_update/
Dollar stable, but still sick
Greenback slips versus the euro on Treasury Secretary Snow's comments over the weekend.
May 12, 2003: 11:49 AM EDT
NEW YORK (CNN/Money) - Helped by a bit of euro profit taking, the dollar stabilized somewhat at midday Monday after slipping to a new four-year low against the European currency earlier following the weekend's talk by Treasury Secretary John Snow.
Just after 11:30 a.m. ET, the euro bought $1.156, compared with $1.1495 late Friday. The dollar also slipped against the yen, buying ?116.78 compared with ?117.21 late Friday.
Appearing on several talk shows Sunday, Snow said the weakness in the dollar would help U.S. exports, and that he thought exports were getting stronger. The dollar has fallen 6.7 percent against the world's major currencies this year, and is down 17.3 percent from where it was a year ago.
"Snow's remarks were quite revealing, really," said Jason Bonanca, currency strategist at Credit Suisse First Boston. "The U.S. is in a curious position at the moment."
Last week, Federal Reserve policy makers opted to leave U.S. interest rates unchanged, as did the European Central Bank. The Fed chose to issue a bias towards easing, citing weak economic conditions, which has some economists speculating about a possible rate cut at its next meeting in June.
With the European Central Bank's rate at 2.50 percent compared with the U.S. benchmark rate of 1.25 percent, investors have been trading their dollars for euros and moving cash in search of higher yields for their money.
But, traders said there's a point when this has to stop -- when the dollar will have depreciated to a point that foreign investors consider U.S. assets cheap enough to buy.
Bonanca said he figures the euro will buy $1.18 before the decline wanes, and that there's a chance the euro could rise as high as $1.20. Meanwhile, he expects the dollar to purchase only ?108 within the next 12 months. Although the U.S. currency's decline against the yen has appeared somewhat more muted than its slide against the euro, much of this has been due to intervention by the Bank of Japan.
Moving away from the euro and looking at a comparison between the dollar and the old Deutsche Mark, it's just under $1.70 -- which is about its average, according to Bonanca.
"This does not yet qualify as a weak dollar by historical standards," he said.
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