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[ThatHawaiiGuy]

FOREX-Dollar slides as sentiment remains bearish


8 October 2003, 10:13am ET



By Gertrude Chavez

NEW YORK, Oct 8 (Reuters) - The dollar slipped against major currencies on Wednesday as market sentiment remained bearish amid growing conviction that a long-awaited U.S. economic rebound may have hit a wall.

In the virtual absence of key economic data, traders continued to be on the lookout for Bank of Japan yen-weakening interventions as Japanese officials continued their jawboning overnight against the yen's rapid movements.

In early U.S. trade, the euro was up 0.33 percent against the dollar at $1.1805, after rising to within one cent of its all-time high earlier in the session. The single European currency's gains kept it slightly supported against the yen as well, buying about 129.36 yen .

Against the Swiss franc , the dollar was once again trading below 1.32 francs, off 0.27 percent on the day. The pound , meanwhile, traded nearly flat on the day against the dollar at $1.6632.

Dealers continue to make reference to the Group of Seven statement on Sept. 20, which called for flexible exchange rates. In addition there is renewed focus in the currency markets on the wide U.S. current account deficit.

"One thing is pretty clear. We're back to talking about the current account deficit," said Philip Capone, a foreign exchange trader at Fortis Bank in New York.

In addition, comments from European officials this week led by outgoing European Central Bank President Wim Duisenberg, that a dollar fall was "unavoidable", have encouraged traders to probe levels for the euro above $1.18.

Traders said the euro seems to be a one-way bet against the dollar and as long as short-term moves above $1.17 hold, the uptrend remains in place.

SNOW APPEARANCE BEFORE SENATE

Markets were also nervously awaiting U.S. Treasury Secretary John Snow's appearance at a Senate hearing on foreign exchange policies next week, and a summit meeting of Asia-Pacific Economic Cooperation in Bangkok later this month.

"These key events are making the dollar a little weaker, although nothing has changed much since yesterday," said Larry Brickman, currency strategist at Banc of America Securities in New York.

STILL ON INTERVENTION WATCH

Traders remained alert to any possible intervention by the BoJ after the dollar fell below the key 110 yen level on Tuesday and following more yen-related comments from Japanese officials overnight. The dollar climbed briefly above 110 yen on Tuesday amid suspicions Japan may have intervened to prop up the greenback.

On Wednesday, the dollar fell 0.37 percent to 109.51 yen .

"Markets are still anticipating any BoJ action for as long as we're below that 110 yen level and after statements from Japan overnight," said Brickman.

Fierce yen-weakening rhetoric ensued in Asian trading, with Japanese Finance Minister Sadakazu Tanigaki indicating that Japan would continue intervening on sharp yen moves.

This was followed by Finance Ministry's International affairs chief Zembei Mizoguchi, who continued a verbal battle against post-G7 dollar bearishness, saying that intervention had tacit approval from other G7 nations.

But he declined to comment on suspected Japanese intervention in New York on Tuesday after the dollar plunged to fresh lows.

(Additional reporting by Carolyn Cohn in London)

http://finance.lycos.com/qc/news/story.aspx?story=35978861

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