|
 Global growth worries, which sent stocks and commodities down across
the board, saw the safe-haven yen hit a five-week high against the
euro. The drop in oil prices to a four-year low below $90 took its
toll on the Norwegian crown.
Norway's currency, which has a strong correlation with oil prices,
sank to its weakest in three weeks against the euro as September
inflation data also dipped below forecasts. The euro was 0.7 percent
up at 8.2690 crowns per euro <EURNOK=>.
The single currency was down 0.5 percent against the yen at 136.36
yen <EURJPY=>, just off the low of 136.34.
"A combination of fears about European growth, about Chinese growth
and Ebola have started to get people a little bit worried, and it's
unsurprising that the yen has begun to move somewhat," said Marvin
Barth, European head of currency strategy at Barclays in London.
The dollar was also down against the Japanese currency at 107.65 yen
<JPY=>, close to a three-week low of 107.50 yen.
After surging around 10 percent in five months against a basket of
currencies to reach a four-year high of 86.747 <.DXY> last Friday,
the dollar has retreated more than 1 percent and is heading for its
biggest weekly fall in more than a year.
In a speech on Thursday, Fed Vice Chairman Stanley Fischer said the
dollar's exchange rate was "appropriate" but added that the U.S.
central bank would watch the currency for its impact on aggregate
demand.
That followed minutes on Wednesday of the Fed's most recent meeting,
which showed policymakers expressing concern that the dollar's
strength could slow a necessary rebound in inflation. There were
also worries about global growth.
The fact that the Fed was talking about the dollar was "very
significant", said Stephen Gallo, European head of currency strategy
at BMO Capital Markets in London.
"What the Fed did was verbally intervene in the currency markets,"
Gallo said.
Investors have taken the Fed's hints about the dollar as evidence it
might bide its time on any rise in interest rates that would boost
the currency, sending the dollar down and stocks up. Futures markets
have pushed back expectations for a first rate hike to September
next year from July.
[to top of second column] |
DOLLAR WEAKNESS
All of that has made markets much more jittery, as seen in a jump in
the CBOE volatility index, a measure of investor anxiety, to highs
not seen since early February.
Analysts said the pick-up in volatility means the dollar's road
higher is likely to get bumpier.
Societe Generale strategist Kit Juckes said the dollar had rallied
too far, too fast since July, on the back of good data and a small
change in the Fed's language.
In a note published on Thursday and titled "Don't buy the dollar,
just sell the euro", Juckes said the European outlook had worsened,
with data confirming that the Ukraine crisis and sanctions on Russia
were hurting growth in Germany.
"Maybe it's time for the FX market to stop looking for a stronger
dollar and focus on the risk of further euro weakness instead," he
said.
But despite a week of troubling signs from Germany, the euro was on
track to post its best week of gains against the dollar in six
months. The single currency edged down 0.2 percent on Friday to
$1.2666.
Sterling sank 0.4 percent to $1.6060 after the anti-EU UK
Independence Party convincingly won its first seat in British
parliament, proving the threat it poses to the main two parties in
next year's national election.
(Editing by Alison Williams)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
