Dollar surges to five-month peak
Friday 11 August 1995
By the London close, the dollar was up by over a yen at 92.82 and by nearly 2 pfennigs at DM1.4221.The pound weakened by a cent against the dollar, closing at $1.5885, but strengthened by a pfennig against the mark, ending the day at DM2.2590, leaving the trade-weighted index against a basket of currencies unchanged at 84.5.
"The breadth of buying over the past two days has exceeded anything seen this year," said Avinash Persaud, head of currency research at JP Morgan. "Confidence about the prospects for the dollar is now much greater, with more than just a few bold investors dipping their feet in the market."
A feature of the dollar-buying was that it embraced mainstream institutional investors and corporations as well as hedge funds chancing their arm. Funds controlled by the currency speculator, George Soros, were also reported as making heavy purchases of dollars.
"Finally, people are starting to believe in the dollar rally," said Lee Ferridge, currency strategist at NatWest Markets. He predicted that, by the end of next week, the dollar could reach Y94, a key resistance point according to technical analysis of the market.
Although the dollar rallied against the mark, it continued to be driven by the recovery against the yen. It is now up by 16 per cent on the low point it reached in April. According to Mr Persaud, markets have taken on board a new stance on the part of Japanese policy-makers, who are now "far more unified, coherent and resolute in their determination to push the yen lower".
However, so far Japanese portfolio investors have apparently been staying mainly on the sidelines. Without their involvement, further big gains - for example taking the dollar back to 100 - are seen as unlikely.
The dollar was also helped by better-than-expected unemployment figures. Initial claims rose by 14,000 in the week to 5 August, compared with market predictions of 25,000. The US Labor Department said that the four-week moving average for claims of 361,000 in the past week was the lowest for three months.
This sign of greater strength in the labour market was seen as likely to fend off further easing of monetary policy by the US Federal Reserve when it next meets on 22 August. With interest rates less likely to fall, this was a further attraction to buy the dollar at a time when it was already rallying.
There was also encouragement from "very tame inflation figures" in the US, which "gave fresh impetus" to dollar-buying, according to Neil MacKinnon, currency strategist at Citibank. Producer prices in July were unchanged on their level in June.
- 1 Forget 'The Dress': Here are five of the biggest news stories you might have missed
- 2 The black and blue dress: Makers considering a white and gold version
- 3 PornHub turns masturbation into energy in bid to save the planet
- 4 The remarkable archaeological underwater discovery that could open up a new chapter in the study of European and British prehistory
- 5 Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
PornHub turns masturbation into energy in bid to save the planet
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
White and gold or blue and black – what colour is the dress? An eyewitness gives a definitive answer
Saudi Muslim cleric claims the Earth is 'stationary' and the sun rotates around it
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
This is what it's like to be dead, according to a guy who died for a bit
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Ukip would cut billions from Scottish budget to fund English tax cuts
iJobs Money & Business
£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...
£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...
£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...
£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...