Wednesday, October 20, 2004

Wow. This news sent my heart into a bit of a flutter. And I'm not talking about the "I'm in love" kind of flutter, either.
The US dollar slid to fresh multi-month lows on Wednesday as the breaking of long-term trading ranges induced momentum traders to jump on board and triggered stop-losses.

The dollar fell to $1.26 against the euro for the first time since February, amid talk that Asian central banks had been selling dollars and buying the single currency, perhaps to reduce losses in the unlikely event of an imminent Chinese revaluation. . . .

. . . with the dollar finally having tumbled out of its well-worn trading range of between $1.18 and $1.25 to the euro, the selling was said to have been exacerbated by technical factors, with the triggering of stop-losses producing a cascade effect. . . .

Attention turned to what measures governments and central banks may take to stop unwanted currency appreciation against the dollar. There was talk of the Bank of Japan contacting banks to check on prices, seen by some as a possible precursor to intervention, although this report was not universally believed. Nevertheless, fears of Japanese intervention, combined with rising oil prices, were instrumental in limiting the yen to a 0.3 per cent gain to Y108.16 against the greenback.


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