There was a flurry of excitement in forex markets this morning when the Jiji news agency in Japan reported that Bush advisor Lawrence Lindsey indicated that he favored a policy of limiting, "moves in the foreign exchange market to a narrow band."
The agency also reported Lindsey as saying that reducing the U.S. current account balance would be a major policy goal of a Bush administration and that this might need a weaker dollar. Traders noted the reported comments but gave them limited credence as they conflict with Lindsey's previously reported views in favor of a strong dollar.
On this report, the euro popped higher but quickly slipped back as the issue lost impact. The single currency is now opening in New York at $0.8595, after touching an overnight high of $0.8635.
As in most of the past week, trading is muted as currency markets await the final outcome of the U.S. presidential election. Traders have withdrawn to the sidelines in the confused atmosphere but the dollar has held its recent gains and is not seen as under any great threat even if the standoff remains for a few days more.
"It's pretty quiet," said Kit Juckes of
RBS Financial Markets
. " The whole world has noticed that the dollar has held up despite much negative news," he added.
A top German government economic advisor said today that the euro is substantially undervalued. "The euro is undervalued against the dollar by between 10% and 30%, a very noticeable amount," said Juergen Donges, chairman of the "five wise men" advisory panel. "We expect to see a rise in the nominal value of the euro versus the dollar during next year but we're not sure if it means parity or not," he commented to reporters.
So far, the view that if the yen fell through the 108 yen/dollar level, it would push towards 110 has had some validity. This morning dollar/yen is another half-yen higher at 108.45. Uncertainty in the U.S. is probably preventing the dollar from moving ahead more strongly. "We ought to push up through 110 if the news gets better," said Juckes.
The euro has also pushed higher vs. the yen, to trade at 93.15.
Sterling made brief gains vs. the dollar on stronger-than-expected average earnings data. However the rally quickly lost steam and the pound is opening lower at $1.4240.
British unemployment actually rose in the latest month, the first increase since November 1998. This surprise news reinforced market sentiment that no further interest rate hikes are likely in the U.K. The likelihood that the next move on interest rates is downward is keeping the pound under pressure. The euro is firmer vs. the pound, at 60.30 pence.
The Swiss franc is firmer against the dollar, at SF1.7695, and is steady vs. the euro, at SF1.5210.
The Canadian dollar is back near recent lows, at C$1.5470, without much indication that it is capable of recouping its losses of the past few weeks.
The Australian dollar remains very weak, at $0.5205, and is only 2% above last month's record lows, at $0.5110. The Aussie dollar spiked 1% in Sydney on rumors of intervention to support the currency by the
Australian Reserve Bank
, but then quickly slipped back. The New Zealand dollar is steady, at $0.3970.
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