Forex - US dollar weaker against major currencies on weak data and Q3 earnings

Forex - US dollar weaker against major currencies on weak data and Q3 earnings

	Published : Fri, 19 Oct 2007 01:26 By : Agencies Print this Story

SYDNEY (Thomson Financial) - The US dollar extended losses against major currencies in midmorning trade Friday after significantly higher than expected weekly jobless claims and disappointing corporate earnings overnight triggered heavy selling in the greenback as investors switched to safer assets.

The dollar fell to an all-time low against the euro and a 2-week low against the yen in New York trade after weekly jobless claims rose 28,000 to 337,000 - 21,000 more than expected and the highest number in 7 weeks.

Meanwhile, the Bank of America, the largest deposit bank in the US, reported a 32 percent fall in third-quarter earnings due to credit market write-downs and loan losses.

The bad news fuelled concerns over the health of the US economy and the sub-prime mortgage crisis, and boosted the chances of the Federal Reserve easing interest rates again at its meeting on October 31.

'Unlike earlier this week when market losses from Citigroup earnings boosted the US dollar against most currencies on flight to quality, the current market declines are triggering broad dollar losses as the latest news are not only US-specific, but also due to Wednesday's ominously weak US figures on building permits and housing starts,' said Ashraf Laidi, chief foreign exchange analyst at CMC Markets in the US.

At 9.50 am (2350 GMT), the US dollar was buying 115.57 yen compared with 115.60 yen in late New York trade. It fell as low as 115.28 yen after the Bank of America released its third-quarter results.

The euro was up at 1.4293 US dollars after soaring to a record high of 1.4311 US dollars overnight. It closed around 1.4290 US dollars.

The dollar is expected to surrender more ground after finance ministers from Canada, France, Germany, Italy, Japan, UK and the US conclude their meeting in Washington on Friday.

The G7 finance ministers are expected to focus on the Chinese yuan, which they believe is undervalued, rather than take steps to reverse the dollar's sustained weakness.

'There might be some hesitation about getting too aggressive, pushing the euro/dollar too high ahead of the G7, but if the G7 doesn't surprise and sticks to the same rhetoric, the dollar should swoon again on Monday morning as sentiment is very bearish,' said John Noonan, an analyst at Thomson IFR.

As investors lose their appetite for risk they are turning to low-yielding currencies such as the yen and Swiss franc, which are seen as safer investments.

'Since Monday, the yen is up 1.6 percent versus the dollar and the Swiss franc is 1 percent higher, followed by the euro (up 0.65 percent) as the next best performer among G10 currencies,' said John Kyriakopoulos, head of currency strategy at National Australia Bank.

The higher-yielding sterling, Australian dollar and New Zealand dollar are at the bottom of the table, Kyriakopoulos said.

Meanwhile, lower risk appetite is stopping the Australian dollar benefiting from weakness in the greenback. The Aussie was buying 89.55 US cents compared with an overnight close of 89.74 US cents.

Sydney at 9.50am (2350 GMT)

US dollar

115.57 yen

1.17 sfr

Euro

1.4293 usd

165.125 yen

1.672 sfr

0.6989 stg

Sterling

2.0448 usd

236.256 yen

2.39222 sfr

Australian dollar

0.8955 usd

0.438 stg

103.455 yen

New Zealand dollar

0.7534 usd

allison.jackson@thomson.com

bhx/ng

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