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Dollar hits record low
Investors are concerned a U.S. housing slump is spreading to other
parts of the U.S. economy,
Oct 21 2007 10:17PM EDT
By Ian Chua
HONG KONG (Reuters) - The dollar slumped to a record low on Monday
after a meeting of the finance chiefs of rich nations ended without
words of support for the currency, while Wall Street weakness prompted
a broad sell off in Asian stocks.
Oil slipped back from its record run on profit taking while gold fell
as investors cashed in on its rally to a 28-year high on Friday.
Traders said shares took their cue from Wall Street, which marked its
biggest fall in two months on Friday, a slide made more unnerving as
it marked the 20th anniversary of the 1987 stock market crash.
Several Asian markets, including Tokyo, fell more than 2 percent in
early trading. Investors dumped exporters, such as Canon Inc, on
mounting worries about the U.S. economy and the dollar's weakness.
Investors sold shares in favor of the relative safe-haven of
government bonds, underlined by a fall in benchmark 10-year Japanese
government bond yields to a one-month low.
Investors are concerned a U.S. housing slump is spreading to other
parts of the U.S. economy, Asia's top export market. Caterpillar, the
worlds top maker of earth-moving construction and mining equipment,
said on Friday several key U.S. industries that it serves were in
recession.
At 0129 GMT, Tokyo's Nikkei average had dropped 2.9 percent, while
MSCI's measure of other stocks in Asia had fallen 1.8 percent.
The MSCI index fell 0.9 percent last week, snapping eight straight
weeks of gains.
South Korea's key KOSPI dropped 3.7 percent and Australia's S&P/ASX
200 index shed 2.1 percent.
"The U.S. market's tumble on a 'Black Monday' anniversary will unnerve
local investors initially," said Kim Joong-hyun, a market analyst at
Goodmorning Shinhan Securities.
"But I don't think the impact would last long because markets have
pretty much priced in the risk from the subprime crisis by now, and as
the outlook for the local economy remains positive."
The falling dollar makes exports from Asia relatively more expensive,
a factor that undermined some of Japan's major exporters. Honda Motor,
Canon Inc, Hyundai Motor, which fell 2 percent to 3 percent.
Banks, which have been weighed by worries about a global credit
squeeze, were also hit.
Japan's top lender Mitsubishi UFJ dropped 2.3 percent and Australia's
Macquarie Bank shed 4.4 percent.
Adding to investors woes, energy stocks such as INPEX Holdings and oil-
and-gas producer Woodside Petroleum were not spared after oil extended
its decline from a record high set on Friday.
U.S. crude fell 76 cents to $87.85 in early Asian session, down from a
peak above $90 on Friday as investors booked profits from the recent
rally.
DOLLAR DOWN
Traders sold the dollar after the tumble in U.S. stocks and following
the G7's apparent indifference over the weakness of the currency. The
finance ministers and central bank heads of the G7 countries met in
Washington on Friday.
"The G7's statement effectively gives a green light to continue
selling the dollar," Michael Woolfolk, senior currency strategist at
the Bank of New York Mellon, said over the weekend.
The dollar hit a record low against a basket of major currencies. It
carved out a six-week low near 113.20 yen, while the euro jumped to a
record high of about $1.4350.
The low-yielding yen tends to benefit from risk aversion because it is
often used as the funding currency for high-yield investments. So when
those are reversed, the investors buy back into the yen.
"We didn't see any surprises from the G7, and weak stocks are
continuing to drag on the dollar," said Hideaki Inoue, forex manager
at Mitsubishi UFJ Trust and Banking.
But weakness in equities drove safe-haven Japanese government bonds
(JGBs) higher. The yield on the benchmark 10-year JGBs fell 4 basis
points to a one-month low of 1.56 percent.
Spot gold took its cue from oil, falling on profit taking after it had
reached a 28-year high on Friday. At 0120 GMT, it was trading at
$756.90 an ounce.
(c) Reuters 2007. All rights reserved. Republication or redistribution
of Reuters content, including by caching, framing or similar means, is
expressly prohibited without the prior written consent of Reuters.
Reuters and the Reuters sphere logo are registered trademarks and
trademarks of the Reuters group of companies around the world.
Investors are concerned a U.S. housing slump is spreading to other
parts of the U.S. economy,
Oct 21 2007 10:17PM EDT
By Ian Chua
HONG KONG (Reuters) - The dollar slumped to a record low on Monday
after a meeting of the finance chiefs of rich nations ended without
words of support for the currency, while Wall Street weakness prompted
a broad sell off in Asian stocks.
Oil slipped back from its record run on profit taking while gold fell
as investors cashed in on its rally to a 28-year high on Friday.
Traders said shares took their cue from Wall Street, which marked its
biggest fall in two months on Friday, a slide made more unnerving as
it marked the 20th anniversary of the 1987 stock market crash.
Several Asian markets, including Tokyo, fell more than 2 percent in
early trading. Investors dumped exporters, such as Canon Inc, on
mounting worries about the U.S. economy and the dollar's weakness.
Investors sold shares in favor of the relative safe-haven of
government bonds, underlined by a fall in benchmark 10-year Japanese
government bond yields to a one-month low.
Investors are concerned a U.S. housing slump is spreading to other
parts of the U.S. economy, Asia's top export market. Caterpillar, the
worlds top maker of earth-moving construction and mining equipment,
said on Friday several key U.S. industries that it serves were in
recession.
At 0129 GMT, Tokyo's Nikkei average had dropped 2.9 percent, while
MSCI's measure of other stocks in Asia had fallen 1.8 percent.
The MSCI index fell 0.9 percent last week, snapping eight straight
weeks of gains.
South Korea's key KOSPI dropped 3.7 percent and Australia's S&P/ASX
200 index shed 2.1 percent.
"The U.S. market's tumble on a 'Black Monday' anniversary will unnerve
local investors initially," said Kim Joong-hyun, a market analyst at
Goodmorning Shinhan Securities.
"But I don't think the impact would last long because markets have
pretty much priced in the risk from the subprime crisis by now, and as
the outlook for the local economy remains positive."
The falling dollar makes exports from Asia relatively more expensive,
a factor that undermined some of Japan's major exporters. Honda Motor,
Canon Inc, Hyundai Motor, which fell 2 percent to 3 percent.
Banks, which have been weighed by worries about a global credit
squeeze, were also hit.
Japan's top lender Mitsubishi UFJ dropped 2.3 percent and Australia's
Macquarie Bank shed 4.4 percent.
Adding to investors woes, energy stocks such as INPEX Holdings and oil-
and-gas producer Woodside Petroleum were not spared after oil extended
its decline from a record high set on Friday.
U.S. crude fell 76 cents to $87.85 in early Asian session, down from a
peak above $90 on Friday as investors booked profits from the recent
rally.
DOLLAR DOWN
Traders sold the dollar after the tumble in U.S. stocks and following
the G7's apparent indifference over the weakness of the currency. The
finance ministers and central bank heads of the G7 countries met in
Washington on Friday.
"The G7's statement effectively gives a green light to continue
selling the dollar," Michael Woolfolk, senior currency strategist at
the Bank of New York Mellon, said over the weekend.
The dollar hit a record low against a basket of major currencies. It
carved out a six-week low near 113.20 yen, while the euro jumped to a
record high of about $1.4350.
The low-yielding yen tends to benefit from risk aversion because it is
often used as the funding currency for high-yield investments. So when
those are reversed, the investors buy back into the yen.
"We didn't see any surprises from the G7, and weak stocks are
continuing to drag on the dollar," said Hideaki Inoue, forex manager
at Mitsubishi UFJ Trust and Banking.
But weakness in equities drove safe-haven Japanese government bonds
(JGBs) higher. The yield on the benchmark 10-year JGBs fell 4 basis
points to a one-month low of 1.56 percent.
Spot gold took its cue from oil, falling on profit taking after it had
reached a 28-year high on Friday. At 0120 GMT, it was trading at
$756.90 an ounce.
(c) Reuters 2007. All rights reserved. Republication or redistribution
of Reuters content, including by caching, framing or similar means, is
expressly prohibited without the prior written consent of Reuters.
Reuters and the Reuters sphere logo are registered trademarks and
trademarks of the Reuters group of companies around the world.
