Dollar rebounds from early run at record low against euro

The dollar fell to within touching distance of its record low against the euro and a four-month trough against the yen on Monday, only to subsequently recover as turbulence on global stock markets continued.
Both the dollar and euro reached their highs for the day against the Japanese currency as US stocks surged in late trade.
In spite of the rebound, the dollar faces a testing time say traders. A US interest rate cut is forecast by Fed fund futures before the end of the year. Analysts said weaker-than-expected US jobs data on Friday had done little to alleviate bearish sentiment towards the dollar.
While the Federal Reserve was expected to keep interest rates on hold after its policy meeting on Tuesday, analysts said the accompanying statement would be scoured for any suggestions that the central bank could react to recent problems in the US subprime mortgage sector by easing monetary policy.
Moreover, Hans Redeker at BNP Paribas said there had been a significant change in the dollar’s trading behaviour as equities markets tumbled on Friday. He said unlike during previous global stock market sell-offs in recent weeks, the dollar had come under pressure. “Previously the dollar had gained on equity market declines as US investors were perceived to be repatriating capital,” he said.
“However, the latest dollar weakness suggests that international investors are now becoming more concerned with the spillover from the subprime and housing market crisis into the rest of the US credit markets and economy.”
The dollar fell to a low of $1.3839 against the euro on Monday in early trade, just shy of the all-time trough of $1.3852 it hit two weeks ago. It later rallied and was up 0.1 per cent at $1.3786 late in New York on Monday. The dollar rebounded 1.2 per cent to Y119.04 after making a low against the yen of Y117.20. The dollar rose 0.5 per cent to SFr1.1918 against the Swiss franc.