NEW YORK (AP) — The dollar posted gains against the yen and major European currencies Tuesday, but only after rebounding from fresh lows earlier in the session.<\/p>\n
The dollar had fallen to a new three-year bottom against the yen and new multi-month lows against the euro, sterling and the Swiss franc early in European trading. However, profit taking after the huge moves in recent sessions — particularly against the yen — lifted the dollar back up off its lows.<\/p>\n
Early Tuesday, the dollar hit a new 33-month low of 110.92 yen. But after taking such a pounding, a profit-taking pullback was always on the cards. The dollar’s recovery was aided by verbal intervention from Japanese officials in Dubai that the dollar’s losses of almost 6 percent against the yen in barely more than a week are “speculative.”<\/p>\n
Near the close of New York trade Tuesday, the dollar was at 112.28 yen, up from 112.02 yen late Monday in New York.<\/p>\n
Against the Swiss franc, the dollar was at 1.3584 compared with 1.3546 a day ago, rebounding from the six-week low of 1.3463 francs hit earlier Tuesday.<\/p>\n
The euro once again failed to hold above $1.15, reaching a two-month high of $1.1529 before retreating back below the figure. At the end of New York trade, the euro was at $1.1445, down from $1.1480 late Monday.<\/p>\n
The British pound was at $1.6520 after climbing to a 2 1\/2-month high of $1.6589, up from $1.6505 late Monday in New York.<\/p>\n
Dealers covered their extensive short dollar\/yen positions, as the market braced itself for possible intervention Wednesday from Japanese monetary authorities returning from Tuesday’s public holiday in Japan.<\/p>\n
“Wednesday and Thursday are very critical,” said the senior dealer at a Japanese bank in New York. “If we don’t see anything from them (Bank of Japan, Ministry of Finance), dollar\/yen could collapse, but if they do something, the market could stabilize for quite a while.”<\/p>\n
The dollar has been under huge selling pressure before and after the weekend meeting in Dubai of finance ministers and central bankers from the Group of Seven leading industrialized nations.<\/p>\n
Dealers have interpreted the final joint communique urging “major countries or economic areas” to adopt “more flexibility” in their foreign exchange regimes to promote “smooth and widespread adjustments in the international financial system, based on market mechanisms” as a green light to sell the dollar.<\/p>\n
Early Tuesday, Zembei Mizoguchi, Japan’s top currency bureaucrat, said post-G7 movements in the foreign exchange market have been too rapid.<\/p>\n
“I believe the market is over reacting and moving in a speculative fashion. I don’t think this will last for too long,” he said, adding: “if the market overshoots, appropriate action will be taken.”<\/p>\n
The dollar’s eventual recovery Tuesday was unaided by official support, dealers said, although European central banks were seen selling euros above $1.15 in London hours.<\/p>\n
Hedge funds and several large U.S., European, and U.K. investment houses bought up dollar\/yen throughout the New York afternoon session, absorbing selling from Commodity Trading Advisors above 112.00 yen.<\/p>\n
Meanwhile, the post-G7 fallout has also jolted the Hong Kong and offshore Chinese currency markets, as traders bet Beijing might allow the yuan to appreciate in coming months.<\/p>\n
The dollar sank to a discount of as much as 110 points to the spot rate in the forward Hong Kong dollar market for delivery one year from now, from a premium of around 23 points late on Monday.<\/p>\n
It was the first substantial discount since October 2001, implying expectations the dollar would fall in the spot market over the next year. That was a dramatic reversal from the situation just a few weeks ago, when concern about Hong Kong’s economic fragility kept the U.S. dollar at a significant premium.<\/p>\n
The reversal followed a highly unusual drop in the U.S. dollar\/Hong Kong dollar spot rate in London and New York trade on Monday. The rate sank to around 7.7450 Hong Kong dollars, well below the HK$7.80 which is guaranteed by the currencies’ 20-year-old peg, before rebounding a bit and stabilizing on Tuesday.<\/p>\n
In an effort to calm the market, the Hong Kong Monetary Authority issued a statement Tuesday recommitting itself to the peg. “We are fully committed to maintaining the linked exchange rate system of Hong Kong,” an HKMA spokesman said. “It is the lynchpin of Hong Kong’s monetary and financial stability and an important factor in Hong Kong’s economic success.”<\/p>\n
——<\/p>\n
Jamie McGeever is a correspondent of Dow Jones Newswires.<\/p>\n","protected":false},"excerpt":{"rendered":"
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