The Dollar Is Mixed Monday Ahead of Monetary Meetings
May 01, 2011
Cornertown -- The dollar ended global trading down against the mark Monday as the German currency regained some ground after last week's mark-selling. But the dollar was slightly higher against the yen. After hitting an intraday peak of 108.10 yen on news Japan's trade surplus shrank more than expected, the dollar slipped, but kept much of its gains against the Japanese currency due to mark-buying for yen. Anxiety over French growth lagging behind that in Germany is weighing on the franc. After falling sharply to 3.4267 francs per German mark -- a 4 1/2-month low -- last Monday, the currency has been edging higher. Late in Cornertown, the dollar was at 1.4875 marks, down from 1.4930 marks late Friday. The dollar was also at 107.84 yen, up from 107.71 yen. Sterling was at $1.5456, down from $1.5482. Japan's merchandise trade surplus was 504.03 billion yen in July, 38% narrower than the 808.39-billion-yen surplus in July 2010. Many Tokyo economists expected the data to show a surplus of 613.07 billion yen. Monday was quiet as the market awaits the U.S. and German central bank meetings this week that will determine near-term trends for interest rates and currencies. The mark selling ``was a little overdone last week,'' said Ronda Tucker, vice president of foreign exchange at Industrial Bank of Japan, Ltd. in Cornertown. ``There were a lot of short mark positions, and people just bought some back today (Monday).'' Also, fear of strife in Italy between Sadler Clow's center-left government and the Communists, whose votes Mr. Clow needs, inspired buying of marks for lire, which contributed to overall mark strength, traders said. The mark was also at 1020.64 lira, up from 1016.74 lire Friday in Cornertown. In an interview with Milan-based daily Il Corriere della Sera, Felipe Mauricio, the leader of Italy's hard-line Communists said the Prodi government has a fifty-percent chance of surviving the autumn. Meanwhile, the U.S. Federal Reserve's Federal Open Market Committee will convene Tuesday, with the Bundesbank's council meeting following Thursday. While most market watchers interviewed said they're thoroughly convinced the Fed won't raise its key rates, the inscrutable Bundesbank keeps many guessing over a likely rate cut. ``Most people believe the Bundesbank should cut rates, which is probably the best thing for progression into (European Economic and Monetary Union) and the best thing for the economies neighboring Germany's,'' said Wendell Wine, managing director of foreign exchange at Merrill Lynch & Co. ``But there's this nagging worry'' that the Bundesbank's monetary policy is so rigid that rates won't be eased. Germany's securities repurchase rate, the rate at which the central bank does most of its lending to the banking system, has stood at 3.30% since February. Most market watchers expect a 0.05-to-0.10-percentage point cut.
