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Dollar brushes aside Lehman's losses
The US dollar rose in choppy trade on Wednesday, shrugging off uncertainty over investment bank Lehman Brothers on the view that problems in the US financial sector would also hurt the global economy.
- Reuters
- Published: 23:39 September 10, 2008
New York: The US dollar rose in choppy trade on Wednesday, shrugging off uncertainty over investment bank Lehman Brothers on the view that problems in the US financial sector would also hurt the global economy.
The dollar briefly fell against the yen on news that Lehman, the fourth-largest US investment bank, recorded a third-quarter loss and did not announce firm deals to raise desperately needed capital.
Lehman, whose share price plunged 45 per cent on Tuesday on growing concerns about its capital situation, reported a loss of $5.92 per share, slashed dividends and said it is actively in talks to sell assets.
Domination
"The yen's reaction was very telling: we had initial risk aversion favouring yen trade, but the strong dollar theme continues to dominate," said Matthew Strauss, a senior currency strategist at RBC Capital Markets in Toronto.
"Problems in the US are not going to be confined to the US and if the financial situation worsens, it will spill over to the rest of the world. Negative news from the US does not necessarily translate into dollar selling."
In New York morning trade, the dollar was up 0.6 per cent at 107.44 yen, after dropping to session lows around 106.61 yen. The euro rose 0.3 per cent to 151.70 yen, pushing away from a 13-month low around 150.15 yen.
The euro trended lower versus the dollar in a volatile session, with analysts attributing the bid to safe-haven flows. The euro zone single currency, which touched an intraday low of $1.4074, was last down 0.1 per cent at at $1.4121.
Safe haven
"We saw a safe-haven bid. As risk gets unwound money simply runs into the dollar, which is why it is getting support right now," said Boris Schlossberg, director of FX research at GFT Forex in New York.
"But we think euro/dollar is very close to forming some near-term bottom."
The ICE Futures US dollar index, which measures the dollar's value against a basket of six currencies, was last up 0.1 per cent at 79.480.
Traders showed limited reaction to European Central Bank President Jean-Claude Trichet, who yesterday told the European Parliament it would be naive to think markets will return to their pre-turbulence state.
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