After breaking through $0.90 for the first time in three months, the euro headed down again in Tokyo Tuesday, December 19, as investors seized their opportunity to reap profits.
The euro bought $0.8962-65 at 5:00 pm (0800 GMT), up from $0.8940 in New York but well down from $0.9009 in Tokyo late Monday.
Against the yen, the euro was quoted at 100.39, down sharply from 101.32 yen in Tokyo Monday afternoon.
"Investors sold the euro for profit-taking," said Fuji Bank dealer Hideyuki Tsukamoto.
Bank of Tokyo-Mitsubishi dealer Kiyoshi Kuzuhara said: "As the Dow was steady, investors sold the euro."
Wall Street's Dow Jones share average rallied 210.46 points to close at 10,645.42 on Monday.
Investors were also favoring the dollar ahead of a Federal Reserve open market committee meeting on Tuesday to set US monetary policy, the dealers said.
A Wall Street Journal report had indicated that Federal Reserve chairman Alan Greenspan might oversee an interest-rate cut given signs of economic slowdown in the United States, Tsukamoto said.
"Usually, the dollar would be sold if US interest rates go lower," he said.
"However, investors might like such a measure designed to ensure a soft landing for the US economy, so bond and stock prices would rebound and the dollar could be bought."
But for now investors were favoring the Japanese yen against the dollar because of expectations the Fed will switch to a neutral monetary stance, rather than favoring higher rates, Bank of Tokyo-Mitsubishi's Kuzuhara said.
The dollar was worth 112.05-08 yen at 5:00 pm, down from 112.25 yen in New York and 112.52-55 yen in Tokyo late Monday.
The euro's rise will be capped if the Fed switches to a neutral bias on rates, said Gerard Teo, currency strategist at ABN Amro in Singapore.
A neutral stance "alleviates concerns of a hard landing for the US economy and that would dampen any further upside for the euro," he said.
"The market still believes the US is a better place to invest over the long term given that it is at the forefront of the technology revolution," Teo added.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)
