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Dollar spikes vs euro, slides against yen

Dollar spikes vs euro, slides against yen

The dollar slipped further against the yen but hit a new multiyear high against the euro on Monday, despite G-7 financial officials talking up a weaker Japanese currency and other governments trying to prop up their currencies.
The dollar fell to 93.93 Japanese yen in late New York trading Monday from 94.52 yen on Friday as traders continued to unwind emerging-market positions funded by borrowed yen, fueling yen-buying. Last week, the dollar sank to a 13-year low at 90.89 yen.
Late Sunday, the G-7 issued a statement in support of a more stable Japanese currency.
"We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," the G-7 finance officials said.
The group stated its shared interest in a "strong and stable financial system" and pledged to continue to monitor markets and "cooperate as appropriate."
"If the yen continues to move the way it has they will have to do something more than verbal intervention," said David Solin of Foreign Exchange Analytics in Essex, Connecticut. "The yen is so tied to this deleveraging that this may be an easy way to back up into supporting all of the financial markets."
But Solin said a concerted intervention was a "long, drawn-out process" that would not likely happen openly any time soon.
Meanwhile, the euro fell to fresh multiyear lows against the dollar.
The 15-nation euro slid to $1.2522 in late New York trading from the $1.2612 it was worth Friday. Earlier in the session, the euro bottomed at $1.2333, its lowest point since April 2006.
Britain's pound was battered too, falling as low as $1.5276, just off its 6-year low, before recovering to $1.5628 in late trading, still sharply below its price of $1.5872 Friday.
Amid the market turmoil, the dollar has regained its coveted status as a safe-haven asset.
Analysts said concerns that government efforts in the U.S., Europe and Asia many not be enough to shake off the likelihood of a recession were pushing the euro lower and boosting the dollar.
"Fear continues to grip global markets and traders are piling into whatever safe havens they can find," said James Hughes, an analyst at CMC Markets in London.
He said that, with the possibility of more rate cuts by the Federal Reserve this week and the European Central Bank and Bank of England next week, there was little chance of the euro or pound rebounding.
Fed policymakers are widely expected to lower the central bank's key interest rate from 1.5 percent at the conclusion of a two-day meeting Wednesday, their last session before next week's presidential election.
While the Bank of England and the ECB have plenty of room to reduce borrowing costs from the current 4.5 percent and 3.75 percent, respectively, the Fed has much less room because its base rate stands at 1.50 percent.
Lower interest rates can undermine a currency, making it less appealing to investors as they look elsewhere for better returns.
The euro and the pound have been hard hit on their exposure to Eastern European countries hurt by the economic turmoil.
Meanwhile, the Reserve Bank of Australia took steps to try to reverse the Australian dollar's freefall in recent months.
On Friday night and Monday morning, the central bank bought up the Australian currency to "provide liquidity to the market," according to a bank spokesperson, who spoke on condition of anonymity because of bank policy. He did not specify how much the bank spent.
"Intervention itself is less effective than jawboning," said John Rothfield, currency analyst for Bank of American Corp. in San Francisco, because the amount of Australian dollars being bought has to be very small compared to daily trading flows. "Verbal intervention can be fairly effective, usually only when the market's ready to turn around itself."
The Australian dollar fell to $0.6066 late Monday in New York from $0.6213 late Friday, after touching as low as $0.6016 earlier in the session, its lowest point since April 2003. In July, the Australian currency peaked at $0.9849, a 25-year high.
The bank last intervened to support its currency in September 2007 and in 2001.
The Brazilian and Mexican governments have also been trying to support their currencies. Mexico has auctioned more than $10 billion in foreign reserves in recent weeks, while Brazil last week said it would spend as much as $50 billion to support the real.
In other New York trading, the dollar fell to 1.1571 Swiss francs from 1.1664, but rose to 1.2893 Canadian dollars from 1.2731.
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Associated Press Writers Matt Moore from Frankfurt, Germany, Rohan Sullivan from Sydney, Australia and Tomoko A. Hosaka from Tokyo contributed to this report.


Updated : 2021-05-06 21:37 GMT+08:00