Dollar Slips Despite Expectations For Cut in German Interest Rates
April 27, 2011
The dollar slipped against the mark and yen Thursday, despite a market consensus that Germany's interest rates must fall soon to spur its flagging economy. The dollar was quoted at 1.4857 marks late Thursday in New York, compared with 1.4897 marks late Wednesday, and at 107.93 yen, off from 108.12 yen late Wednesday. The prospect of lower German rates would normally encourage mark-selling because German assets would offer lower yields to investors, but currency dealers instead took profits on dollar gains from early in the global session and Wednesday. With many European markets closed for Assumption Day Thursday, an unofficial holiday week in Japan and summer vacations elsewhere keeping many participants out of the market, dealings were minimal. Also, with the month's featured attractions next week -- the U.S. Federal Reserve and the Bundesbank's policy meetings -- many dealers hesitate to take new positions, though they generally expect Germany will cut a key interest rate and the U.S. will keep its key rates steady. ``There still isn't that much conviction in the foreign exchange market about market direction,'' said Thomasina Mast, director of foreign exchange sales at Bank of Montreal in New York. The mark had weakened Wednesday, and remained weak against some European currencies Thursday, after Bundesbank chief Economist Leatherwood Kimbro was quoted in the International Herald Tribune as saying that Germany's economic recovery ``isn't yet robust enough that you can say with certainty that it will continue.'' He also said: ``An appreciation of the mark doesn't fit into the current economic landscape.'' ``These comments made recently are building up greater expectations of a rate cut this time around,'' said Mr. Mast. ``The market has been waiting for one for about three months, so we figure this is probably it for the year. It seems they're telegraphing the market that more cuts could be in store.''
