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[ThatHawaiiGuy]

Dollar Sags Broadly as Outlook Falters
Tuesday October 7, 2:32 pm ET
By Kyle Peterson

[Silver rebounds 7¢ to 4.85 last I checked...expect another attack soon...should get it back to around $4.50; are you catching on to what a great deal it is under 5?]


CHICAGO (Reuters) - The dollar sagged against major currencies on Tuesday, reaching a fresh three-year low against the yen on growing market views that the fledgling U.S. economic recovery may be wavering.

In the absence of U.S. economic data, traders were on high alert for possible intervention by the Bank of Japan to weaken the yen as the dollar fell to fresh three-year lows against the Japanese currency, well below the 110 yen mark.

The dollar rebounded above 110 yen briefly in late-morning New York trading before edging lower to around 109.73 yen as traders suspected Japan may have intervened in the currency markets. Traders said Japanese banks were spotted buying dollars for yen at around the 109.58 yen level, but Bank of Japan officials in New York declined to comment.

"I think they're trying to hold the (dollar) near the 110 level," said Michael Malpede, senior currency analyst at Refco in Chicago. "I don't think they want it to get much below there. That's what their goal is."

The dollar's moves against the yen followed comments by Japanese Economics Minister Heizo Takenaka that while intervention is not itself an ideal policy tool, the government must ensure that currency rates do not move too rapidly.

In early afternoon in New York, the euro (EUR=) was up 0.62 percent against at $1.1770 after rising to a three-month high above $1.18. But the single currency fell against a resurgent yen, buying about 129.38 yen (EURJPY=), down 0.42 percent on the day.

Against the Swiss franc (CHF=), the dollar fell below 1.32 francs, off 0.42 percent on the day. The pound (GBP=), meanwhile, fell against the dollar to $1.6616.

The U.S. dollar also fell to new seven-year lows against the Canadian dollar (CAD=) in early trading but recovered slightly and was down 0.80 percent at C$1.3298. The greenback also fell to near a six-year trough against the Australian dollar, with the Australian unit climbing above the US$0.69 level(AUD=).

"The dearth of (economic) data today and tomorrow is not offering any respite for the weaker dollar," said John McCarthy, director of foreign exchange at ING Capital Markets in New York. "If we had U.S. economic data, this would have given the market a pause, such as what happened on Friday. But in the absence of that, the market just sold off (the dollar)," he said.

Tim Mazanec, foreign exchange director at Investors Bank and Trust in Boston, noted that concerns over the overall U.S. macroeconomic picture have once again reemerged, putting the focus on the burgeoning U.S. current account deficit.

In addition, currency markets continued to have lingering doubts over whether Friday's robust U.S. labor numbers were convincing enough to signal a reversal in massive job losses over the last two years.

JAPAN INTERVENTION WATCH

Markets remained cautious about possible BoJ action to weaken the yen against the dollar. The dollar fell to a new three-year low against the Japanese currency at 109.36 yen (JPY=), although it subsequently rallied slightly since then amid BoJ intervention rumors.

"There have been rumors of BoJ, MoF and Federal Reserve, but nothing we can confirm one way or the other," said a trader with a Japanese bank in London.

"We dipped below 110.0 yen and triggered some (options) barriers that were around there," said Marc Chandler, chief currency strategist with HSBC in New York. "It underscores how bearish people are on the U.S. dollar."


http://biz.yahoo.com/rb/031007/markets_forex_8.html