Dollar Slides Against Euro in Thin Trade
The U.S. dollar slid against a basket of major currencies in thin trade Wednesday while the yen traded near seven-week lows as investors continued to fund carry trades by borrowing the Japanese currency.
"We are seeing the dollar head a little lower today, but given volumes are extremely light, we can't really see its drop as a major trend," said Andrew Busch, a global foreign-exchange strategist with The Bank of Montreal in Chicago. "I'm recommending my clients to step outside forex markets until the end of the year."
Early afternoon in New York, the euro was up 0.7 percent at $1.4502, near its session high. Earlier in the day, the euro advanced above $1.45 for the first time in nearly two weeks.
The dollar index, which tracks the value of the greenback against six currencies, was down 0.6 percent at 77.144.
Currency traders shrugged off data showing U.S. home prices in October posted their biggest annual drop in the history of the S&P/Case-Shiller index.
While the data was two months old, it did stir some concern among investors who expect the dollar to resume a broad slide in 2008 as credit worries resurface and signs of a U.S. economic slowdown increase.
Investors may now focus on other economic data still set for release this week. A report on durable goods orders for November is due Thursday, and a reading on new U.S. home sales for November will be released Friday.
Overnight, the dollar rose to 114.39 yen, just short of a seven-week high hit on Monday, before easing back from those levels.
"The dollar eased a bit against the yen as stocks opened lower, but the key words are 'a bit,"' said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. "There is very little liquidity out there, so any big price action today I would put down to one-off orders."
The yen fell after minutes from recent Bank of Japan policy meetings revealed officials were worried about high oil prices and the impact of slower U.S. growth on the Japanese economy.
Markets took that as a signal that the central bank won't be lifting its 0.5 percent interest rate soon. The rate is the lowest in the developed world and the engine of carry trades that use cheaply borrowed yen to buy higher-yielding currencies.
"Nothing is going to come out of Japan on the rate front in the next couple of months," said Busch at The Bank of Montreal. "Big moves won't happen with the yen for now."
On Monday, the yen hit a seven-week low against the dollar after Merrill Lynch said it would shore up its capital by raising up to $6.2 billion by selling shares to Singapore's Temasek and asset manager Davis Selected Advisers.