Forex - US dollar mixed against major currencies after strong overnight gains

Forex - US dollar mixed against major currencies after strong overnight gains

	Published : Tue, 23 Oct 2007 01:42 By : Agencies Print this Story

SYDNEY (Thomson Financial) - The US dollar was mixed against major currencies in midmorning trade Tuesday after clawing back ground overnight as investors unwound yen-funded carry trades in response to volatility on global financial markets.

'It is difficult finding a single catalyst for the dramatic US dollar rise, but the most likely cause is financial market volatility forcing funds to liquidate positions,' said John Noonan, an analyst at Thomson IFR.

'US funds that are spread across a number of asset classes have been running large short US dollar positions against a number of currencies, but especially the euro. The big moves in the equity, bond and commodity markets were the likely catalysts for US funds buying a huge portion of their US dollars back.'

At 10.25 am (0025 GMT), the US dollar was buying 114.425 yen compared with 114.55 yen in late New York trade. The euro was down at 1.4179 US dollars from 1.4180 US dollars.

The Australian dollar also came under pressure from carry trade unwinding overnight, falling to 87.52 US cents before settling at around 88.60 US cents. It was slightly higher at 88.61 US cents in midmorning trade.

Despite strong gains overnight, the outlook for the US dollar is still negative with further interest rate cuts in the US likely, said John Kyriakopoulos, head of currency strategy at National Australia Bank.

Higher-yielding currencies such as the Australian dollar should benefit from strong economic growth in India and China, he said.

'We continue to expect further interest rate cuts in the US, with the Fed funds rates forecast to fall to 4 percent by early 2008,' he said.

'But we don't look for a US recession and expect global economic activity to remain solid with China and India continuing to grow rapidly. This outlook is bearish for the US dollar rather than negative for high-yielding currencies leveraged to global economic growth like the Australian dollar.'

Sydney at 10.25 am (0025 GMT)

US dollar

114.425 yen

1.1775 sfr

Euro

1.4179 usd

162.245 yen

1.6695 sfr

0.6975 stg

Sterling

2.0337 usd

232.691 yen

2.39436 sfr

Australian dollar

0.8861 usd

0.4357 stg

101.375 yen

New Zealand dollar

0.7479 usd

allison.jackson@thomson.com

bhx/ng

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