The dollar exchange rate recorded a new record low value against the euro on Monday in global foreign exchange markets after investors interpreted the apparent indifference of G7 meeting participants as a signal for speculative selling of the greenback.
The euro strengthened against the dollar by 0.2 percent in morning trading, reaching 1.4335 dollars, briefly touching a value of 1.4348 dollars. The yen also strengthened against the dollar, by 0.4 percent to 114.01 yen. The Japanese currency appreciated against the euro as well, at 162.88 yen per euro. The dollar weakened after monetary officials from the G7 group of developed industrial countries did not explicitly address the low dollar exchange rate in the official statement from the meeting held this weekend in Washington.
"Some feared that the G7 would somehow mention the weak dollar, but that did not happen, leading to a sell-off of the dollar," explains Chris Turner from ING. The euro drew support from the forecast of Bundesbank President Axel Weber in an interview for the Sunday edition of a German daily that inflation in the eurozone could reach three percent by the end of the year, increasing the prospects for a renewed hike in key interest rates in the eurozone. In contrast, a reduction in key interest rates is expected in the U.S. from the current level of 4.75 percent. The yen strengthened against the dollar and the euro because investors are wary of risk and thus of currency carry trades, in which they sell yen and buy currencies with higher yields. (H)
