Dollar resumes its slide against the euro

Dollar resumes its slide against the euro
By Peter Garnham
Copyright The Financial Times Limited 2006
Published: November 30 2006 11:52 | Last updated: November 30 2006 11:52


The dollar resumed its slide against the euro and slumped to a 14-year low against the pound on Thursday amid continuing fears over the state of the US economy.

The dollar received some respite in the previous session from an upward revision to US growth.

On Wednesday, the dollar rallied after official data showed that US gross domestic product grew at an annual rate of 2.2 per cent in third quarter against an estimated 1.6 per cent and consensus forecasts of a 1.8 per cent rise.

However the dollar fell 0.5 per cent to $1.9549 against sterling, dropped 0.4 per cent to $1.3193 against the euro and eased 0.1 per cent to Y116.24 on Thursday.

“The fact that the real GDP data has failed to underpin the dollar serves to underline the fact that dollar sentiment remains dire,” said Derek Halpenny, senior currency economist at Bank of Tokyo-Mitsubishi UFJ. “Market participants are likely to continue pushing it lower through the month of December when the dollar tends to perform poorly against both the euro and the pound.”

Indeed, the pound was in the vanguard of the assault on the dollar, rising to its highest level since its ejection from the European Exchange Rate Mechanism in September 1992.

Sterling was given a boost as figures from the Nationwide Building Society revealed UK houses prices rose at annual rate of 9.6 per cent in November, their fastest pace since February 2005.

Traders said the figures increased the likelihood of further rate rises from the Bank of England, while the market continued to price in a rate cut as the most-likely next move from the Federal Reserve.

Meanwhile, the euro rose 0.2 per to Y153.49 against the yen, notching up a fresh record high for a fifth consecutive day.

The single currency was supported by a series of strong economic data as eurozone inflation rebounded in November and the EU commission raised its growth forecasts.