Pressure Continues on Dollar’s Value
The dollar remained under pressure in overseas trading on Thursday, holding less than a cent above record lows against the euro, while most major foreign stock markets closed modestly higher.
With Wall Street shuttered for the Thanksgiving holiday, action overseas was thin.
The dollar was hovering around $1.19 per euro after slumping to $1.194 on Wednesday in New York -- near the record low of $1.195 set Nov. 18.
Robust U.S. economic data in recent weeks have failed to bolster the dollar’s value against the euro.
“The U.S. is struggling to finance its deficit, and the underlying [financial] flow picture is poor,” said Shahab Jalinoos, senior currency strategist at ABN Amro in London. “Persistent concerns of terror attacks and trade disputes mean investors are not willing to hold dollars,” he said.
What’s more, many foreign investors believe that economic growth in Europe will pick up in 2004 while the U.S. economy’s pace could fade a bit. Stronger economies tend to have stronger currencies.
A report Thursday from a Paris-based economic research group said that manufacturers in France, Europe’s third-largest economy, were at their most confident in 11 months in November. Business confidence also rose in Germany, Italy and Belgium this month, recent reports have showed.
“It’s satisfying to see the recovery that started in the U.S. and Japan is now also reaching Europe,” said Michel Raemy, a fund manager at Banque Bonhote & Cie in Neuchatel, Switzerland.
In Paris, the CAC-40 stock index rose 16.47 points, or 0.5%, to 3,431.66 on Thursday. The index is up 12% this year in euro terms, lagging well behind the 20.3% rise in the U.S. Standard & Poor’s 500 index.
In Germany, the DAX index gained 32.01 points, or 0.9%, to 3,744.99. It’s up 29.5% this year, the best performance of all major European markets.
Stocks also advanced in Spain, Italy and Switzerland, but in Britain the FTSE-100 dipped 9.20 points, or 0.2%, to 4,361.10. Like the French market, British stocks have been laggards this year. The FTSE-100 is up 10.7% year to date.
In Japan, Tokyo’s benchmark stock index inched up for a third session Thursday as investors bought shares in retailers and other domestic-oriented shares.
The Nikkei-225 index added 18.55 points, or 0.2%, to 10,163.38. It has gained 18.5% in yen terms this year.
In Hong Kong the Hang Seng index eased 10.68 points, or 0.1%, to 12,075.99. It is up 29.6% since Dec. 31.
Latin American stock markets were mostly higher Thursday. Mexico’s main IPC share index rose 70.58 points, or 0.8%, to 8,455.98. It had pulled back over the last two weeks but is close to the record closing high of 8,643.93 set on Nov. 13.
Brazil’s stock market closed at a record high for the fifth time in the last six sessions, buoyed by the Senate’s first-round approval of a much-anticipated pension reform bill a day earlier.
The Sao Paulo Stock Exchange’s benchmark Bovespa index surged 265.95 points, or 1.4%, to 19,960.77.
The gains, which left the Bovespa up a whopping 77% this year, came after the Senate approved late Wednesday the general terms of a pension bill that aims to save the government more than $16 billion over the next 20 years.
Many economists say final approval of the bill, which is expected in the coming weeks, is crucial to ensuring Brazil’s ability to service its $250-billion public debt.
In Canada the S&P;/TSX index rose 20.11 points, or 0.3%, to 7,880.50. It has nearly matched the U.S. S&P; 500 index’s performance this year, with a gain of 19.1% in Canadian dollar terms.
But because of the weak U.S. dollar, American investors in Canadian shares have reaped far bigger returns: The Canadian share index is up 43.2% in U.S. dollar terms this year as the stronger Canadian currency has translated into more American dollars.
The weak dollar also has enhanced American investors’ returns in European, Japanese and Australian stocks.
Through last week, the average return on foreign stock mutual funds was 27.4% year to date, compared with a 24% gain for the average U.S. stock fund, according to Morningstar Inc.
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Reuters and Bloomberg News were used in compiling this report.
