The dollar lost ground across the board today as the forex market got back into gear after the Columbus Day slowdown. Meanwhile, fear of further intervention from the
central banks caused traders to go easy on their euro sales as the currency revisits the intervention levels of two weeks ago.
There is also disappointment with the weak performance of the U.S. equities markets, which raises questions about the future pattern of capital inflows from Europe and elsewhere.
"If we have another poor day in the U.S. stock market, that would put pressure on the dollar," said Derek Halpenny at
Bank of Tokyo Mitsubishi
. "With the central banks behind the euro, why not buy it? There's little downside," he added.
As the market opens in New York, the euro is around $0.8715, half a cent above yesterday's lows.
German annualized inflation reached a six-year high of 2.5% in September, driven by higher oil prices. This raises again the possibility of further interest rate hikes in Europe.
European Central Bank
placed funds at its routine weekly auction at a weighted average rate of 4.78%, roughly in line with market expectation.
Dollar/yen edged lower, unaffected by the fallout from the bankruptcy of
Chiyoda Mutual Life Insurance
. Financial failures in Japan are often seen as constructive by the forex market, which believes that the financial sector needs thinning out.
A second factor boosting the yen on the bankruptcy announcement is the need for this company -- and others -- to get rid of underperforming euro-denominated investments. This creates short-term yen demand.
More clear-cut good news for the yen came in the announcement that machinery orders jumped 26.6% in August following a decline of 11.7% in July. This manifests yet again the dichotomy that has emerged in the Japanese economy, with the industrial sector doing well while the consumer sector remains stuck in a long-term trough.
"After dollar/yen got up to 109.50 last week and failed to go on from there, the Chiyoda Life gave an excuse for the long dollar/yen positions to be covered," said Halpenny.
The euro/yen cross remained stable around 94.15 in the face of gains by both the euro and the yen.
Dollar/Swiss franc eased along with the general softness of the dollar. It opened at SF1.7420, about 1% below yesterday's highs.
Sterling has ticked higher on a kick up in the domestic inflation rate. The pound is at $1.4550, as the U.K. retail price index was reported at 3.3% in September after 3.0% in August. However, the core rate remained below target at 2.2% per year. Sterling remains tied to the euro at a cross-rate of 60 pence.
The Canadian dollar remained close to Friday's levels around 1.5010, with few new factors to motivate the market.
The Australian dollar remained within a few points of last week's record low at $0.5280. It was lately trading at $0.5325. Traders have been selling the Aussie against the yen as the Japanese currency looks to be heading higher.
The New Zealand dollar is choppy around $0.4030 just above its all-time low.
The South African rand is sliding lower against the dollar and is now trading around 7.36/dollar. The firmer euro should have helped strengthen the rand, but continued political unrest in neighboring Zimbabwe has kept the currency under pressure.
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