Foreign exchange markets felt the impact of China's growing economic muscle this week when a report claiming the country's central bank had sold US Treasuries helped push the euro to all-time highs, underscoring market sensitivity about a possible yuan revaluation.
Forex markets saw the euro climb to 1.3329 dollars in early European trading Friday after a report in the China Business News quoting Yu Yongding, a member of the &to=http:// english.pravda.ru/politics/2002/08/15/34569.html ' target=_blank>monetary policy committee under the central bank.
"Undoubtedly it was a major cause of the dollars selling across the board," said Callum Henderson, head of forex operations at Standard Chartered bank in Singapore, says Channel News Asia.
According to the Bloomberg, the &to=http:// english.pravda.ru/world/20/91/368/14499_Cuba.html ' target=_blank>dollar may drop for an eighth week and set a record low against the euro after the world's major central banks signaled they will allow the currency to extend its slide, a Bloomberg survey indicates.
Sixty-eight percent of the 59 strategists, investors and traders polled on Nov. 26 from Tokyo to New York advised selling the dollar against the euro. Participants also predicted the U.S. currency will weaken against the yen, British pound, Swiss franc and Australian dollar.
The dollar has lost as much as 3 cents against the euro since Federal Reserve Chairman Alan Greenspan said on Nov. 19 that foreigners will tire of financing the record U.S. current account deficit. He was joined on Nov. 25 by &to=http:// english.pravda.ru/economics/2002/05/15/28728.html ' target=_blank>Bank of England Chief Economist Charles Bean, who said in a speech in Colchester, England, that international investors are unlikely to keep buying American assets indefinitely, triggering a "possibly substantial" drop in the dollar.
European Central Bank President Jean-Claude Trichet is speaking on European economic integration on Monday and addressing the Economic and Monetary Affairs Committee of the European Parliament on Tuesday.
Last Friday, Trichet once again spoke out against the euro's rally, saying that "recent moves on the exchange markets between the dollar and the euro are unwelcome."
European officials have been attempting to talk the euro down, but with little success thus far. Similarly, Japanese officials will likely engage in "jawboning" efforts to slow the appreciation of the yen this week. Verbal activity, but no active intervention in currency markets, is the likeliest response from Japanese officials to strength in the yen, Mazanec said.
"At this point in time, going long yen doesn't seem to be much of a losing cause," he said. "The fear factor is not there."
Despite the yen's move to multi-year highs, the Bank of Japan, which intervenes on behalf of the government, hasn't been seen in currency markets. In fact, Japan hasn't intervened since the first quarter, reports Yahoo News.
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