|
CNBC'S MOST SHARED
- Unemployed? Bored? Make Money Playing Beer Pong
- Warren Buffett's Top Three Investment Rules for the Average American
- The Highest Grossing (Inflation Adjusted) Movies of All Time
- Geek Squad V. Gizmodo
- Merrill's McCann Seen as UBS Wealth Frontrunner
- Social Networking's 'Naked' Truth
- Blog You!!!
- Why the Credit Pendulum Is Stuck at 'Stupid'
- WPP's Sir Martin Sorrell on the Ad Recession
- Why the Credit Pendulum Is Stuck at 'Stupid'
- Cheney Told CIA to Withhold Information: Report
- 'Bruno' Fashions Top Spot at US Box Office
- Stimulus Will Kick in Later this Year: President Obama
- Lender CIT Group Hires Premier Bankruptcy Adviser
- Government Selling Bank Stakes for Too Cheap: Panel
- Buffett's Top 3 Investment Rules for Average Americans
- Market Insider: Earnings Loom in the Week Ahead
- Bulls Get Summertime Blues, But It's Hot Fun for Bears
- Eric Schmidt on Government Scrutiny and Economic Recovery
- Market 360: The Week's Best & Worst
- Geek Squad V. Gizmodo
- Brandt: Google Chrome OS in the Post-PC Age
- Other People Are Weirder Than We Are
- Bank Failures: Is The Nightmare Over? (Video)
- California Here I Go? No.
- Roginsky: No More Mr. Nice Guy
- Commercial Conundrum
The dollar rallied against most major currencies Thursday, buoyed by demand from U.S. corporations seeking to square their books by the end of the month.
![]() |
Analysts said U.S. data on jobless claims and new-home sales for October did little to alter expectations that the Federal Reserve will reduce benchmark U.S. interest rates by a quarter percentage point to 4.25 percent next month.
Some are even predicting the Fed will ease by half a point.
But expectations of a rate cut failed to stem the rally in the dollar, whose recent losses, some analysts say, have gone too far.
Overstretched positioning in the dollar, which in recent weeks has plumbed historic troughs against a number of currencies, made it particularly vulnerable to a correction, analysts said.
"I think the dollar is holding up pretty well because some U.S. corporations are buying to close their books at the end of the month," said Rafael Martorell, chief currency dealer at BNP Paribas in New York.
"Overall, I get the sense that some people in the market believe the dollar's weakness has been too much and that we may see a bottom to it soon," he added.
Mid-afternoon in New York, the New York Board of Trade's U.S. dollar index, a gauge of the greenback against a basket of major currencies, was up 0.7 percent at 75.598, moving away from the record low of 74.712 struck last week.
The euro [$$EURUSD
Loading...
()
] was down 0.5 percent against the dollar at $1.4753.
Some analysts have also suggested rate cuts could help the dollar indirectly as they would help avoid a U.S. recession.
Lower rates typically make dollar-denominated securities less attractive, reducing demand for the currency. However, given concerns about persistent weakness in the U.S. housing and credit markets, signs that the Fed will continue to act to help the U.S. economy should attract investment inflows.
"The currency market is closely paying attention to these potential investments that will help stabilize some financial companies. Overall, that is seen as positive for the dollar," said Manfred Wolf, director of corporate foreign exchange sales at HVB Bank in New York.
Expectations of a Fed rate cut next month and of more to come in 2008 got a boost after Fed Vice Chairman Donald Kohn said Wednesday that renewed financial market turmoil could slow the U.S. economy more abruptly than thought.
Reports on Thursday, which showed a jump in U.S. weekly jobless claims, third-quarter U.S. economic growth relatively in line with expectations, and the first quarterly drop in U.S. house prices in 13 years affirmed Kohn's view although the data had little impact on the dollar.
Dollar/yen [$$USDJPY
Loading...
()
], however, was one of the few negative currency pairs for the dollar, trading down 0.3 percent at 109.75.
Traders said it was being pressured by trading in euro/yen [$$EURJPY
Loading...
()
], which was down 0.9 percent at 161.95.
The Australian dollar [$$AUDUSD
Loading...
()
] dropped more than 1.0 percent to $96.85.
"There is still too much risk aversion going on, what with Libor rates going up, so I would sell the Aussie [Australian dollar] on rallies and buy the yen on weakness," said BNP's Martorell.
Investor focus now shifts to a speech by Fed Chairman Ben Bernanke late in the day.
The Fed slashed overnight lending rates by a half percentage point in September and by a further quarter point in October, bringing them down to 4.5 percent.









