The dollar fell for the second day running Thursday against the euro on persistent rumors of intervention by central banks in Europe to shelter the embattled single European currency.
Friday, May 21, 2010
By: AFP writers
NEW YORK, May 20, 2010 (AFP) - The dollar fell for the second day running Thursday against the euro on persistent rumors of intervention by central banks in Europe to shelter the embattled single European currency.
The euro fetched 1.2482 dollars in New York at 2100 GMT, from 1.2408 dollars Wednesday but analysts said the euro remained weak after plumbing four-year-lows earlier in the week.
Some analysts attributed the euro rise to profit-taking by investors who overbought dollars while others cited rumors of intervention by the European Central Bank and Swiss National Bank.
"With the European debt crisis posing systemic risk and threatening to undermine the fragile economic recovery, European officials are coming under increasing pressure to act decisively," analysts at private bank Brown Brothers Harriman said.
"What is driving the price action now is not value but risk management."
But the analysts were skeptical the euro rally was due to intervention especially by the European Central Bank.
Kathy Lien, director of currency research at Global Forex Trading, said the latest euro rise against the dollar "could have some legs" if several economic reports from the Eurozone scheduled Friday "surprise to the upside."
With the European debt problems continuing to grip markets, some analysts speculated the euro could fall below the 1.2000 level.
"With little technical support for the euro-US dollar above the 1.1800 launch rate, next week could see a break of the 1.2000 level in an attempt to make a run at this level," said Bank of New York Mellon analyst Michael Woolfolk.
"The problem is that the risk is far from one-sided, with the US dollar well into over bought territory," he said.
Woolfolk felt remarks by European officials aiming to calm market fears could push the euro higher in the near-term.
"However, it is difficult to imagine anything that can be said or done at this point that will satisfy markets long-term short of a re-write of the laws governing the Eurozone."
The US dollar's role as a save haven currency in times of turmoil will push the greenback higher, analysts said.
"Current sentiment has been very supportive of the dollar and US bond market as risk aversion has taken hold and the flight to quality offering a sense security in uncertain times," analyst Garry Duncan of PNC Bank said.
In late New York trading, the dollar fell against the Japanese currency, to 89.62 yen from 91.70 on Wednesday.
The British pound fell to 1.4353 dollars from 1.4442 dollars while the greenback rose to 1.1513 Swiss francs from 1.1508.
