Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

U.S. Dollar Falls to 19-Month Low




TOKYO -- The U.S. dollar plunged to its lowest level in almost 19 months Tuesday in the wake of the euro's strong debut on foreign exchange markets this week


In Moscow, the ruble remained stable against the dollar as the Central Bank kept the official exchange rate at 20.65 rubles. But the currency averaged a much lower 22.5 rubles to the dollar in trade on the Moscow Interbank Currency Exchange, which opened Tuesday for its first 1999 session.


The U.S. currency bought 111.48 yen at midafternoon Tuesday in Tokyo, down 2.38 yen from late Monday and also below its late New York level of 112.07 yen overnight. The dollar last traded below the 112-yen level in June 1997.


In currency dealings, the dollar fell as low as 110.79 yen early on but then recovered slightly as traders rushed to cover short, or oversold, positions.


The dollar's drop followed the official launch Monday of the euro, one of a slew of factors contributing to the U.S. currency's decline, traders said.


"The euro's robust debut Monday confirmed the fact that the majority of market players feels uneasy about holding dollars,'' said Yukihiko Hashimoto of Sanwa Bank.


The euro was trading at $1.1810 at midafternoon Tuesday in Tokyo, lower than $1.1828 late Monday in New York. The euro was at $1.1873 in Tokyo late Monday. Russia's Central Bank also set its official exchange rate for the euro at 24.4 rubles, although the new currency does not start trading on MICEX until next week.


Although the euro traded quietly against the dollar in Tokyo, it gyrated wildly against the yen Tuesday, swinging between 132.88 yen and 130.94 yen in morning trading.


The euro was at 131.92 yen at midafternoon.


The plunge below 131.00 yen was blamed on position unwinding by players that bought too much of the new currency during its debut on Monday, traders said.


Comments by Eisuke Sakakibara, Japan's influential deputy finance minister for international affairs, also propped up the yen, traders said. Speaking about an article in Tuesday's Nihon Keizai business daily in which he was quoted predicting a stronger yen in 1999, Sakakibara said, "I only meant that the dollar won't rise to the 140-yen level.''


He declined to comment on the dollar's drop below 112 yen overnight.


Sakakibara also was quoted by Nihon Keizai Shimbun as saying that the U.S. economy looked fairly "bubblelike."


Traders said growing pessimism about the prospects for the American economy, as well as a narrowing interest rate differential between the U.S. and Japan, also weighed on the dollar.


"Sakakibara's comments were enough to add further selling pressure to the dollar, which was already pretty bearish," a Japanese dealer said.


"Looking at the dollar's limited recovery after the morning's sharp falls, the market is very eager to hold on to its dollar-short positions," he added.