FOX: Dollar weakness persists as euro hits 5-month high
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - The dollar fell for a fourthstraight session Wednesday, hitting a fresh five-month lowagainst the euro, as generally weak U.S. economic data fueledexpectations of further monetary easing.
Mounting speculation the Federal Reserve could embark on asecond round of quantitative easing, which would be negativefor the dollar, drove the greenback to a two-year troughagainst the Australian dollar and a 2-1/2-year low versus theSwiss franc.
"We obviously have a negative combination for the U.S.dollar, and the Fed opening the door for potential easing hasjust stoked fears of dollar weakness and currency debasementgenerally," said Camilla Sutton, chief currency strategist atScotia Capital in Toronto.
Analysts said the dollar could face further losses as aselling trend takes hold, while the euro would continue risingafter becoming resilient to economic and banking problemsfacing some countries on the periphery of the euro zone.
The euro jumped to a five-month high at $1.3644according to electronic trading platform EBS, before pullingback to $1.3615, up 0.3 percent on the day. Traders say there'san option barrier at $1.3650, which could go given the euro'supside momentum.
Also helping the euro was a report Wednesday showingeuro zone economic sentiment unexpectedly rose in September.
The next big objective for the single euro zone currency is$1.3692, the high hit on April 12, traders said.
"Technically, there are no warning signs that the recentstrength in euro is coming to an end. The upward trend is wellintact and even with the feeling that the euro has come too fartoo fast widespread, it is too early to fight the dollarweakening trend," Scotia's Sutton said.
Gains in the euro, however, were capped after Standard andPoor's downgraded nationalized Anglo Irish Bank's lower tier 2debt to CCC from B.
Irish and Portuguese yield spreads hit euro lifetime highsagainst German bonds on Tuesday on concerns over thosecountries' fiscal deficits.
The euro has risen about 11 percent against the dollar sofar in the July-September quarter and is on track for itsbiggest quarterly percentage gain in about eight years,according to Reuters data.
The dollar index meanwhile, was down 0.2 percent at78.836, not far from an eight-month low of 78.616 hit earlier.
Dollar weakness helped push the Australian dollar to atwo-year high of US$0.9730 after a large optionbarrier at US$0.9700 gave way. It was last at US$0.9697, up 0.2percent from late Tuesday.
The Swiss franc rose to 0.9735 francs per dollar, a2-1/2-year high, according to Reuters data. The dollar lasttraded at 0.9771 francs, up 0.1 percent on the day.
It later gave up those gains after data showedSwitzerland's leading growth indicator, the KOF economicbarometer, eased to 2.21 in September from 2.22 in August.. The KOF beat forecasts of 2.12, but some inthe market had expected an even stronger reading.
The dollar also looked vulnerable against the yen, hittingits lowest since Japan intervened to sell the yen two weeks agoto drive the dollar up from a 15-year low.
Later on Wednesday, the U.S. House of Representatives isexpected to pass legislation to pressure China to let its yuancurrency rise more quickly. [ID:nN28172488].
The dollar fell to 83.50 yen on EBS, its lowestsince Sept. 15, when Japan intervened. It was last at 83.66yen, down 0.3 percent.
Many in the market say Japan is likely to intervene again ifthe dollar threatens the 83 yen area, as Japan's interventionbegan after it had hit a 15-year trough of 82.87 yen. (Additional reporting by Neal Armstrong in London; Editing byPadraic Cassidy)
