Dollar stumbles to new
lows on call for China
sales
Gold futures climb to nearly $850 an ounce; crude oil vaults above $98 a barrel
By Steve Goldstein, MarketWatch
5:12 AM ET Nov 7, 2007
LONDON (MarketWatch) -- The U.S. dollar stumbled to new lows on
Wednesday after a top Chinese official called for the country to shift
more of its huge foreign exchange stockpiles out of the beleaguered
greenback.
Cheng Siwei, vice chairman of the Standing Committee of the National
People's Congress, was quoted by wire services as saying China should
shift more of its $1.43 trillion of currency reserves into "stronger
currencies," such as the euro, to offset "weak" currencies like the dollar.
He also said a rapid appreciation of the yuan is not necessarily the
right move -- as Washington and increasingly Europe are requesting --
though Cheng insisted the country wasn't actively seeking a major
trade surplus.
The reports sent the beleaguered dollar to new lows against the euro,
with the shared currency surging as high as $1.4703 from $1.4559 late
Tuesday.
The Japanese yen also rallied, with the dollar falling to 113.52 yen from
114.71 yen. The British pound surged to $2.1025 -- the first time sterling
has broken $2.10 since May 1981 -- from $2.0866.
Gold futures, which traditionally move in the opposite direction to the
dollar because of their role as an inflation hedge, jumped $23.40 to
$846.80 an ounce, and rose as high as $848 an ounce during the
European morning. Oil futures rose above $98 a barrel in electronic
trading.
"As if ballooning U.S. credit/ housing crunch data, back-to-back Fed
cuts and soaring oil prices weren't enough to stun the U.S. dollar, now
we have the specter of central bank reserve asset diversification out of
U.S. dollars to contend with," said Vincent Chaigneau, the head of fixed
income and foreign currency strategy at Societe Generale, in a note to
clients.
The dollar has been weak over the last few months as the Federal
Reserve has slashed interest rates by three-quarters of a percentage
point due to the credit crunch. The euro during August traded as low as
$1.3417.
The question in currency markets is now the degree to which Cheng was
signaling an official policy change. "He would most probably be
familiar with, though not privy to, policy discussions on the
exchange-rate mechanism, FX reserves and liquidity management,"
Chaigneau said.
Steve Goldstein is MarketWatch's London bureau chief.
lows on call for China
sales
Gold futures climb to nearly $850 an ounce; crude oil vaults above $98 a barrel
By Steve Goldstein, MarketWatch
5:12 AM ET Nov 7, 2007
LONDON (MarketWatch) -- The U.S. dollar stumbled to new lows on
Wednesday after a top Chinese official called for the country to shift
more of its huge foreign exchange stockpiles out of the beleaguered
greenback.
Cheng Siwei, vice chairman of the Standing Committee of the National
People's Congress, was quoted by wire services as saying China should
shift more of its $1.43 trillion of currency reserves into "stronger
currencies," such as the euro, to offset "weak" currencies like the dollar.
He also said a rapid appreciation of the yuan is not necessarily the
right move -- as Washington and increasingly Europe are requesting --
though Cheng insisted the country wasn't actively seeking a major
trade surplus.
The reports sent the beleaguered dollar to new lows against the euro,
with the shared currency surging as high as $1.4703 from $1.4559 late
Tuesday.
The Japanese yen also rallied, with the dollar falling to 113.52 yen from
114.71 yen. The British pound surged to $2.1025 -- the first time sterling
has broken $2.10 since May 1981 -- from $2.0866.
Gold futures, which traditionally move in the opposite direction to the
dollar because of their role as an inflation hedge, jumped $23.40 to
$846.80 an ounce, and rose as high as $848 an ounce during the
European morning. Oil futures rose above $98 a barrel in electronic
trading.
"As if ballooning U.S. credit/ housing crunch data, back-to-back Fed
cuts and soaring oil prices weren't enough to stun the U.S. dollar, now
we have the specter of central bank reserve asset diversification out of
U.S. dollars to contend with," said Vincent Chaigneau, the head of fixed
income and foreign currency strategy at Societe Generale, in a note to
clients.
The dollar has been weak over the last few months as the Federal
Reserve has slashed interest rates by three-quarters of a percentage
point due to the credit crunch. The euro during August traded as low as
$1.3417.
The question in currency markets is now the degree to which Cheng was
signaling an official policy change. "He would most probably be
familiar with, though not privy to, policy discussions on the
exchange-rate mechanism, FX reserves and liquidity management,"
Chaigneau said.
Steve Goldstein is MarketWatch's London bureau chief.
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