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. Last Updated: 07/27/2016

Dollar Takes Dive in World Markets




LONDON -- The dollar took a beating across the board Wednesday, falling to multi-month lows against European currencies and giving up a key psychological barrier against the yen. Global investment flows were clearly turning against the dollar amid concerns over U.S. asset markets and optimism about growth opportunities elsewhere, traders said.


"I think people are starting to smell the coffee now," said David Bloom, currency strategist at HSBC Markets in London.


"The U.S. stock market's not looking like the most brilliant thing on Earth, and your investment horizon has opened," he added.


"There could be a recovery in Japan, there is a recovery under way in Europe, there is a recovery in Southeast Asia."


He noted that the dollar's effective exchange rate had dropped by a full percentage point in 24 hours. The Bank of England's trade-weighted index for the U.S. currency fell as low as 99.15 from Tuesday's intraday peak of 100.35.


The euro rose to a high of $1.0796 earlier, its highest since May 11 and a full cent above late European levels Tuesday, fueled by positive European economic data. The single currency was trading at $1.0766/71 midmorning after bumping into technical resistance at $1.08.


Earlier in the day, the euro drew support from news that German wholesale sales rose a real 1.2 percent in June from a year earlier and that German July services sector activity index rose to its highest in almost a year. The French consumer confidence index also rose to minus 8 in July from minus 10 in June.


With European currencies broadly gaining on the U.S. unit, the dollar fell as low as 1.4825 Swiss francs, its lowest since April 15, while the British pound rose to $1.6290, its highest in nearly three months.


The pound's rally was aided by a rise in July UKI services activity index to the highest level since April 1998. But the pound later pulled back toward $1.6220 despite a July CBI distributive trades survey showing retail sales rising at their fastest pace in 18 months.


Bank of England's two-day monetary policy committee meeting kept traders cautious to some extent, although analysts expected interest rates to be left unchanged.


The dollar, which had clung to the 115-yen area against the yen throughout Asian trading amid wariness of central bank intervention, eventually succumbed to the market's broad based bearishness in midmorning Europe.


It was last trading at 114.65/70 yen against 115.03/08 late in Europe on Tuesday.


"We saw a lot of selling interest yesterday in the upper-115s, so we need something really surprising to move up against supply," a dealer at a Japanese bank in London said.