The dollar steadied on Wednesday, September 12, in the wake of the unprecedented terrorist strikes on US targets, but activity was thin as dealers mourned colleagues feared killed in the attacks.
The euro fell back to 0.9072 dollars at 2100 GMT Wednesday from 0.9146 a day earlier. The dollar meanwhile bought 119.49 yen from 119.17. Central banks joined forces to promise enough liquidity in the markets to ensure that the global financial system does not grind to a halt as a result of the destruction of the World Trade Center.
"The forex markets have been cut back dramatically," said Chris Furness, an analyst with the 4CAST research agency. "Liquidity is very thin, banks are helping each other out for particular settlement dates. It's very sort of hands-together and backs against the wall."
"The dollar was sold off as a knee-jerk reaction to the events and saw continued selling until first thing this morning," he told AFP. "Since that time it has recovered somewhat." Economists expect central banks to react to the chaos by cutting interest rates to encourage better sentiment. "It would show the markets very much that the consumer was important to the central banks and we've got to keep things going," said Furness.
The Swiss franc was emerging as the main safe haven currency, but the euro and yen have both been in demand ever since a succession of hijacked aircraft wrought havoc in New York and Washington.
Many agree that the carnage will disrupt US business life for some weeks if not months to come, tilting the world's foremost economy closer to recession if not into an outright slump and threatening the dollar.
"Declining equity markets will be a blow to confidence and the fact that assets in the heart of the US have been destroyed by terrorists could easily throw the country into a confidence crisis," warned BNP Paribas currency expert Hans Redeker.
Others said that the attacks would damage the US economy and dollar because consumer confidence would be sapped. "The consumer was the mainstay of the US economy and if this does hit consumer confidence badly then obviously it will hit the economy and growth prospects," said Foley, warning that it could tilt the world's foremost economy into recession.
In late New York trading, the dollar was exchanged at 1.6592 Swiss francs from 1.6387 a day earlier. The pound was worth 1.4678 dollars from 1.4748 Tuesday. ― (AFP, New York)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
