January 20, 2004
Dollar sinks against Euro, Loonie, rises against yen.
The Financial Times
article that after a couple days of rising and stabilizing, the dollar resumed its downward trajectory, going down two cents, from $1.238 to $1.2539 as trading resumed following the American holiday weekend.
The euro shrugged off verbal intervention from the eurozone finance ministers and climbed against the dollar on Tuesday even as the US currency held near recent highs against the yen following the Bank of Japan's unexpected easing of monetary policy.
The euro reached a peak of $1.2539 against the dollar as US traders reached their desks after a long weekend break.
A meeting of Eurozone ministers didn't seem to make any difference.
Howeever, the statement by the eurozone ministers dominated market attention. The group, meeting in Brussels, released a joint comment on the euro, highlighting the eurozone's determination to go into next month's G7 meeting with a unified viewpoint.
Read more about the meeting.
The group dropped its usual line about a "strong and stable euro," instead choosing to stress stability.
"We are concerned about excessive exchange rate moves," the group said. "We will continue to monitor the situation closely, and conduct policies supporting economic recovery in a stable macroeconomic environment."
But the euro, at $1.238 as European traders reached their desks on Tuesday, started a steep climb. Charlie McCreevy, the Irish finance minister chairing the talks, said the group had no view on contingency plans for combating renewed euro strength.
The dollar rose against the yen a bit though, as the Japanese appeared to back off a bit on their struggle to continue to intervene.
Read more about the Bank of Japan's actions.
The dollar shrugged off pressure against the euro and other currencies, and rose against the yen after the Bank of Japan surprised markets with further monetary easing.
The dollar was at Y107.2 against the yen, having traded around Y106.6 a day earlier.
Meanwhile in Canada, the Globe and Mail
reports that the loonie, the Canadian dollar, rose a bit as the Bank of Canada cut interest rates.
The Bank of Canada cut interest rates for the first time in almost five months Tuesday, citing the combined impact of a soaring loonie and weaker-than-expected demand on this country's recovering economy, and economists say the door remains wide open for more moves if the picture doesn't brighten.
The move lowers the central bank's key target for the overnight rate to 2.5 per cent, from 2.75 per cent.
... “Despite stronger global economic growth, the rapid appreciation of the Canadian dollar against the U.S. currency has cut into the overall growth of aggregate demand for Canadian goods and services through weaker exports and increased imports,” the central bank said.
The loonie gained more than 20 per cent against the U.S. dollar last year and has continued to climb early in 2004.
Despite the rate cut, the dollar continued to hold its ground in early going, suggesting that the markets had anticipated the latest move and priced in the cut. Just before it 11:30 a.m., the loonie was trading at 77.60 cents, up 0.78 of a cent.
At 9:14 a.m. EST, the dollar was trading at 77.09 cents.
I think it's a bad idea for the bankers to continue to interfere with the evolution of a new global financial order, and continue to claim that the falling US dollar is bad for their countries' interests. And obviously the markets agree. Unfortunately, the so-called "experts" seem to continue to think that the American economy continues to "drive" the global economy, and continue to make their judgments based on that. They should let the markets work. They also seem to really believe that the American economy is recovering based entirely on the stock markets rise, which really isn't true. As I said before this is essentially a co-dependent relationship, and one that's going to come to an end, one way or another.
