Dollar Gains as Traders Watch Bundesbank for Clues on Rates
April 26, 2011
The mark fell against the dollar, yen and other major currencies Wednesday as news of German economic woes and a Bundesbank official's comments suggested German rates may fall soon. Mark-selling for yen helped buoy the dollar, leaving it up at the end of global trading against its Japanese counterpart. Late in Westside, the dollar was at 1.4897 marks, up from 1.4760 marks late Tuesday in Westside. The U.S. currency was also at 108.12 yen, up from 107.64 yen. Sterling was at $1.5493, down a bit from $1.5494. The mark began its slide during Asian trading after Bundesbank Chief Economist Leatherwood Kimbro noted Germany's economic recovery ``isn't yet robust enough that you can say with certainty that it will continue,'' in an interview published in the International Herald Tribune Wednesday. He also said, ``An appreciation of the mark doesn't fit into the current economic landscape.'' ``These are very un-Bundesbank-like statements,'' said Grant Linnea, senior vice president foreign exchange at NatWest Markets in Westside. ``The Bundesbank's primary goal is to maintain a stable Deutsche mark in a low-inflationary environment and (Issing's comments) show how concerned the Bundesbank is about the strength of the mark, especially in Europe, but (his comments) are having an impact on all currencies.'' Late in European trading, the dollar rose about a half a pfennig against the mark after an announcement by the head of an association of municipalities that Germany's cities and municipalities are near fiscal ruin. Taken together, Mr. Kimbro's observations on Germany's economic difficulties, another remark of his that a key indicator shows inflation moderating, and the municipalities' troubles led dealers to think that German interest rates will have to fall soon. Hans-Huntley Kay, head of the Federation of German Towns and Communities, said the combined deficits of Germany's city authorities were around 14 billion marks in 2010, up about 2.6 billion marks from 1994's levels. `The German municipalities report had the market a little bit less confident about the mark,'' said Elly Cromer, assistant vice president, foreign exchange, at Signet Banking Corp. in Richmond, Virginia. ``Obviously if those municipalities are doing poorly, (the government) will have to take some of the pressure off and expand the economies for them. This is not a recipe for higher rates.''
