Dollar Consolidates After Recent Losses
reuters.com Wed January 22, 2003 01:36 PM ET By Andrea Ricci
NEW YORK (Reuters) - The dollar was barely changed on Wednesday as it consolidated after recent losses, but dealers said the greenback remained vulnerable to news on Iraq.
The dollar, which has plumbed fresh three-year lows against the euro for five sessions in a row, climbed off the latest low of $1.0744 per euro reached during Asian trading hours but failed to make much headway.
It was the same story against the Swiss franc, where the dollar was idling above four-year lows touched on Tuesday.
"The dollar has had a really big move down, and there are still people who are looking for a correction ... and willing to buy on dips," said Bob Lynch, currency strategist at BNP Paribas in New York.
"But by and large, the dollar's declines against the euro and the Swiss franc are intact," he said.
The dollar has fallen almost uninterrupted since early December on worries over possible war with Iraq, and dealers said that the bias toward the greenback would remain negative as long as geopolitical tensions persisted.
The White House kept up the pressure on Iraq on Wednesday, with President Bush warning Iraq's military that its members would be prosecuted as war criminals if they used weapons of mass destruction on U.S. troops or their own people.
In early afternoon in New York, the dollar was trading at $1.0716 per euro, nearly flat on the session but above the overnight lows. Against the Swiss franc, it was up about a tenth of a percent at 1.3641 francs to the dollar, above the four-year low of 1.3605 struck on Tuesday.
DOLLAR NOT TOO WEAK?
The dollar's sharp decline has not gone unnoticed by policymakers outside the United States; but in Europe at least, few appear concerned.
Indeed, European Central Bank council member Ernst Welteke told the German sister paper of the Financial Times that the dollar was not too weak on foreign exchange markets and needed no support.
Japan, on the other hand, on Wednesday once again reminded the market that it was ready to act against foreign exchange moves which were too rapid. Japan would like a weaker yen to help its export sector, and its threats of yen-selling intervention have given support to the dollar.
Japanese Prime Minister Junichiro Koizumi was one of a number of officials who weighed in on Wednesday, with Koizumi saying the government would take appropriate action on foreign exchange as needed.
The dollar was at 118.29 yen JPY= in early afternoon in New York, up 0.16 percent.
Dealers said the White House policy toward the dollar appeared to be one of benign neglect, but most were waiting to see how John Snow, the White House nominee for Treasury Secretary, addressed the issue.
Snow goes before the Senate for confirmation hearings next Tuesday.
The White House on Wednesday said it was confident Snow would be confirmed, despite revelations that he had been arrested in 1982 on a drunk driving charge, which was dismissed, and had been involved in a child support payment dispute in 1988.
VENEZUELA ENACTS CURRENCY CONTROLS
In Venezuela, the central bank on Wednesday said it was closing the country's foreign exchange market for five trading days as the government moved to stem capital flight spurred by a crippling seven-week opposition strike against leftist President Hugo Chavez.
The bolivar has tumbled more than 24 percent against the dollar since the start of this year and 28.5 percent since the strike started on Dec. 2.
Clyde Wardle, emerging markets currency strategist at HSBC in New York, said the central bank wanted to give the market a breather.
"The bank is hoping that in the next few days there might be a resolution to the strike, which would lead to a pullback in the bolivar," he said.
But without movement on the strike front, the central bank's efforts were unlikely to be successful, he said.
"If there is no progress on ending the strike, or at least seeing the two sides come closer together, then what we may see is that the central bank extends the moratorium," he said.