FOREX-Euro hits 4-year high on Snow comments

Reuters ^ | May 11, 2003 | Unknown

[fightinJAG]

FOREX-Euro hits 4-year high on Snow comments Sun May 11, 2003 07:23 PM ET TOKYO, May 12 (Reuters) - The euro hit another four-year high against the dollar on Monday after U.S. Treasury Secretary John Snow said a cheap U.S. currency would help U.S. exports. "When the dollar is at a lower level it helps exports, and I think exports are getting stronger as a result," Snow said on a U.S. television programme on Sunday.

On another programme, Snow said Washington was commited to a strong dollar but that its value would be set by markets.

"The fact that he mentioned the benefits of a weak dollar could be taken as a sign that he accepts weak dollar. His comments will set the tone of the market this week," said Shogo Nagaya, forex manager at Nomura Trust and Banking Corp in Tokyo.

The dollar has been steadily weakening in recent weeks on doubts about the outlook for the U.S. economy and due to lower U.S. interest rates compared to those of other currencies.

As of 2320 GMT, the euro was at $1.1572/77 , up about three quarters of a percent from about $1.1490 in late U.S. trade on Friday, and hitting its highest level since January 1999.

The single currency also hit a record high against the yen, touching 135.40/52 yen from around 134.67 in New York.

The dollar's slide against the yen was curbed by wariness that Japanese authorities could intervene to stem the yen's rise.

The greenback slipped to 116.80/85 yen by 2320 GMT, down from about 117.20 yen in U.S. trade, but still some way off its recent 10-month bottom of 116 yen hit last week.

Talk swirled late last week that Japan had intervened recently but the Ministry of Finance declined to comment.

"The data the government recently announced showed they intervened on many days early this year so I think they could be in the market any time," said Nagaya.

Last week, Japan said it sold the yen for dollars and euros on 17 days in the first quarter of 2003, starting from January 15 when the dollar fell below 118 yen in the run-up to the U.S.-led war in Iraq.

[shrinkermd]

Until recently defending the dollar was the official policy. Now it seems to be "let it slip." I doubt our balance of payments problem will be solved by a crashing currency, but our super low interest rates might suffer.

In the meantime, it is good news for the gold market.

[Ken522]

Pardon my ignorance, but let me ask you this: So what's coming down the pike?? If interest rates go up, then that will put a damper on the refi market, and dry up credit. What about those people who already have mortgages? Will the already-established mortgage rates go up? Thank you.

[shrinkermd]

"Pardon my ignorance, but let me ask you this: So what's coming down the pike?? If interest rates go up, then that will put a damper on the refi market, and dry up credit. What about those people who already have mortgages? Will the already-established mortgage rates go up? Thank you."

I don't know for sure and certainly can't predict interest rates; however, if you currency is depreciating against other currencies you simply have to offer something if you wish to borrow --that generally means higher interest rates.

[McGavin999]

This will be devistating to the European economy. They're having a hard time as it is and if the euro is strong it really impacts their exports. On the other hand, it's good for us because more people will be buying our exports.

Worrying about the relative strength or weakness of the dollar is just plain silly. It might bring the intrest rates up a bit but then it'll be coming up because business is becoming an active borrower again and that means jobs.

[FreedomPoster]

I've seen this referred to as "our hidden tax on Europe for Gulf War II".