By Kim-Mai Cutler
Dec. 19 (Bloomberg) -- The dollar advanced the most against the euro in almost two months as traders judged the decline after the Federal Reserve lowered interest rates to near zero this week as too fast to be sustained.
The euro also weakened after the European Commission said the region may suffer a “substantial” effect from the financial crisis next year. The yen traded near a 13-year high against the dollar even after the Bank of Japan lowered its target lending rate to 0.1 percent.
“This is a retracement of the very big dollar losses we saw earlier this week,” said Chris Furness, the head of foreign-exchange strategy in London at 4Cast Ltd. “There’s been a shakeout of euro positions after gains, and there’s concern that the European Central Bank will have to play catch-up.”
The dollar climbed 1.8 percent to $1.3985 versus the euro at 7:56 a.m. in New York, from $1.4240 yesterday, when it slumped to a 12-week low of $1.4719. The U.S. currency gained as much as 2.3 percent today, the biggest intraday gain since Oct. 24. The euro fell 2 percent to 124.93 yen from 127.44. The dollar traded at 89.32 yen, compared with 89.43. It dropped to 87.14 yen on Dec. 17, the lowest level since 1995.
The dollar declined 4.3 percent against the euro this week after the Fed lowered its target lending rate on Dec. 16 to a range of zero to 0.25 percent. The Fed reiterated plans to purchase agency debt and mortgage-backed securities and said it will study buying Treasuries.
The nine-day relative strength index of the dollar versus the euro, a comparison of magnitude of gains and losses, was at 21.44 yesterday, below the level of 30 that signals a change in direction may be imminent.
“This is not a fundamentally driven move in the euro,” said Lutz Karpowitz, a Frankfurt-based currency strategist at Commerzbank AG. “We have very low liquidity right now, and volatility is very high.”
To contact the reporter on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net
Posts
No comments:
Post a Comment