Hat-trick puts shine on the dollar
In a classic safe-haven reaction to the threat of political uncertainty in Russia, the currency markets sold marks and bought dollars. They also reversed some of the lira's recent losses against the mark caused by uncertainty about Italian politics and government finances.
Jeffrey Wu, currency trader at Sanwa Bank in New York, said: "The market is definitely reacting to the Yeltsin hospitalisation. Investors worldwide are selling marks because Germany is so close to Russia and is Russia's largest trading partner."
The US currency's advance against the mark was aided by a recovery in the lira. The improved chance of the Italian government surviving a vote of no confidence after Communist deputies said they would abstain took the lira higher against the mark during the day. The lira recovered to L1,142.9 to the mark from L1,159 on Wednesday, while share prices in Milan soared 2.5 per cent.
The third element in yesterday's dollar hat-trick was news of a strong increase in orders for durable goods placed with US factories in September.
The dollar lost some gains after its initial reaction to the flurry of news, but by noon in New York it was trading at DM1.3939 and 101.46, up from DM1.3922 and 101.24.
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