17 October 2001, 16:55  FOREX-Dollar upbeat ahead of Greenspan testimony

By Carolyn Cohn
LONDON, Oct 17 - The dollar rose against major currencies on Wednesday, testing its highest levels against the yen since September 11, as cautiously optimistic markets looked to U.S. Federal Reserve Chairman Alan Greenspan for reassurance.
Greenspan testifies on monetary policy and the economic outlook before the Joint Economic Committee at 1400 GMT, against a backdrop of recent confidence-restoring U.S. interest rate cuts and plans for a massive fiscal stimulus,
The dollar has clawed back much of the losses made following suicide attacks on U.S. cities on September 11, and has risen by two percent against the euro and the yen since the United States launched its first raids on Afghanistan on October 7.
"There seems to be a pretty positive attitude towards the dollar," said Rob Hayward, senior foreign exchange strategist at ABN Amro.
"Stocks are doing better and markets are expecting Greenspan to reassure people."
An upbeat after-hours outlook from U.S. computing giant IBM on Tuesday also supported the greenback, with stock index futures indicating a stronger open on Wall Street.
The dollar strengthened by 0.75 percent to five-day highs around $0.9015 per euro and 1.6460 Swiss francs and by nearly half a percent to the day's highs around 121.80 yen by 1130 GMT.
"People are becoming quite optimistic about the U.S.," said Sonja Hellemann, foreign exchange strategist at Dresdner Kleinwort Wasserstein.
"The initial risk aversion has gone away, and the speculative part of the market is unwinding its short dollar positions."
Inflation continues to be a major issue in the euro zone, with consumer prices rising by 0.3 percent month-on-month and 2.5 percent year-on-year in September, down from a year-on-year rise of 2.7 percent in August.
Euro zone inflation has been declining in recent months, but is still above the European Central Bank's two percent ceiling. ECB council member Ernst Welteke said on Tuesday that lower interest rates could be in the offing if price pressure in the region continued to recede.
The ECB left interest rates steady last week, prompting some euro zone finance ministers to say they saw room for manoeuvre in monetary policy to promote growth.
Sterling, meanwhile, found support from expectations of more British rate cuts to come, after minutes of the Bank of England Monetary Policy Committee's October meeting showed an 8-1 vote for a quarter point interest rate cut to 4.5 percent. Sushil Wadhwani was the sole dissenter, seeking a half-point cut. The MPC also voted 7-2 for a quarter point emergency rate cut on September 18.
In addition, data showed British claimant count unemployment fell again in September, confounding expectations for a rise. The claimant count measure fell by 4,900 to 942,100, a fresh 26-year low.
"The UK economy will do better than most others, and sterling will move back up," said Hayward.
The pound was trading at the day's highs around 62.40 pence per euro , but weakened against the buoyant dollar, at $1.4450 .

© 1999-2022 Forex EuroClub
All rights reserved