The same stories continue to dominate the forex market: The U.S. presidential election remains on hold while votes are recounted in Florida, and the euro slips lower from day to day.
It is difficult to reconcile these two slightly contradictory events. The market clearly isn't too worried about the fate of the dollar in this period of unique political uncertainty.
"What's happened to euro/dollar is hard to explain," said Matthew Clements of
Prebon Marshall Yamane
. Clements doesn't read too much into the euro's soft tone; he sees it as largely a function of the confused situation in the U.S. "Since the intervention, there is a more established support level around 85 cents," he asserted. (On Friday and again on Monday, the European Central Bank stepped in to buy euros in an effort to stabilize the currency.)
Currency trading remains muted, with players uninterested in taking new positions. Overnight the euro traded in a narrow range between $0.8520 and $0.8560 and is now opening in New York at $0.8535. Should the presidential race be decided in favor of George W. Bush, the dollar would probably get a boost, and the euro could slide lower.
, executive vice president of the
New York Fed
, contended that the
had been successful in halting the decline of the euro following its intervention in September. "The operation was successful in terms of what you can expect from an intervention," he said to a news briefing. He made no comments about future U.S. policy in this area.
The yen is largely outside of currency movements at present and remains steady to open around 107.25. The euro fell against the yen at 91.50. Clements thinks the yen's stability won't last forever. "The yen is set for some kind of significant breakout, based on technical charts," he said. Clements expects a medium-term yen rally -- initially to the 106 area.
Yesterday, sterling closed lower at $1.4250. Its weakness continued overnight, and the currency is opening at $1.4170. The
Bank of England
left interest rates unchanged at 6.0% today. Analysts believe that the U.K. economy is slowing and that further interest rate hikes are unlikely.
The Swiss franc is lower against the dollar at SF1.7810 and also lower vs. the euro at SF1.5205.
The Canadian dollar remains weak around 21-month lows at C$1.5425. Traders suggest that uncertainty over the U.S. election is spilling into Canada, where a general election is scheduled for November 27.
The Australian dollar is again weaker today at $0.5240, despite positive comments from
, the governor of the
Reserve Bank of Australia
, who continues to see strong growth in the economy next year. He also said that the Aussie dollar was undervalued. "I am confident the equilibrium exchange rate is higher than we are," he said in a speech in Melbourne.
The New Zealand dollar remains soft at $0.3970.
The South African rand dropped sharply to a new record low at 7.765/dollar. Yesterday the rand was trading at 7.65. The currency has come under additional pressure as the dollar has gained vs. the euro. Emerging markets currencies in general have lost ground amid growing concern over the financial crisis in Argentina.
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