Dollar rebounds against euro

October 18, 2010
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, LONDON, Oct 18 – The dollar rebounded strongly against the euro on Monday as investors adjusted positions after the common currency had reached the highest level for almost nine months, dealers said.

In London trade, the euro dropped to 1.3855 dollars from 1.3973 dollars late in New York on Friday, when it had soared as high as 1.4159 — which was last seen in late January.

Against the Japanese currency, the dollar fell to 81.24 yen from 81.44 on Friday.

"The dollar is drawing buy-backs against the euro and Australian dollar," said Tsunemasa Tsukada, chief manager at the currency sales desk of Mitsubishi UFJ Trust and banking.

"I believe the longer-term trend is a weak dollar but some adjustment moves (on the dollar\’s recent plunge) are going on," Tsukada said.

The dollar had already gained ground in New York on Friday despite the Federal Reserve\’s strongest indication yet that it was poised to inject cash into the markets to boost the economy.

Fed chairman Ben Bernanke said the US central bank was ready to ramp up extraordinary measures to prime the economy amid sky-high unemployment and the risk of crippling deflation.

But the speech offered little new information amid already high expectations in the market that the Fed will ease its credit grip further.

"Ben Bernanke\’s speech on Friday to the Boston Fed confirmed that quantitative easing is going ahead, but he failed to provide the markets with more details on the size and form of this extra stimulus," said Kathleen Brooks, an analyst at online trading group Forex.com.

"This has fuelled a mini-correction in the dollar, as investors fear that too much quantitative easing has been priced into the market already."

After the Bernanke comments, the Australian dollar had briefly surged to 1.003 US dollars late on Friday, the first time it has reached US parity since the "Aussie" was floated in December 1983.

The British pound was mixed as Britain\’s coalition government prepares to unveil massive spending cuts on Wednesday.

Britain\’s finance minister George Osborne on Sunday said the cuts would restore credibility to a country that he claimed had been on the brink of bankruptcy.

But he faces serious questions over whether the cuts will be so tough that they tip Britain back into recession.

In London, the euro changed hands at 1.3855 dollars against 1.3973 dollars late in New York on Friday, at 112.56 yen (113.81), 0.8737 pounds (0.8742) and 1.3352 Swiss francs (1.3389).

The dollar stood at 81.24 yen (81.44) and 0.9636 Swiss francs (0.9580).

The pound was at 1.5858 dollars (1.5984).

On the London Bullion Market, the price of gold fell to 1,357.95 dollars an ounce from 1,367.50 dollars an ounce late on Friday.

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