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Dollar Rallies Against Euro, Yen as Gold Shows Weakness

July 24, 2002|From Bloomberg News

The dollar resurged Tuesday and gold tumbled, both hinting that fear levels on Wall Street may be about to recede.

The dollar scored its biggest one-day gain in 10 months against the euro, with the latter ending in New York at 98.9 cents, down from $1.01 on Monday.

The greenback also rallied against the yen, closing at 117.54 yen, versus 116.35 Monday.

In commodities trading, near-term gold futures plunged $10.90 to $312.70 an ounce in New York. It was the biggest one-day drop for the metal in five years.

Currency traders said the dollar's rebound may signal that U.S. portfolio managers are selling foreign holdings and bringing their dollars home.

The euro's sudden weakness also may reflect that European stock markets have been performing as bad, or worse, lately than Wall Street, at least measured in euro terms.

"Other markets around the world are also taking their lumps," said Alex Beuzelin, a currency analyst at Ruesch International in Washington. "Selling the dollar is no longer the one-way bet it's been the past few months."

Demand picked up for the dollar as analysts said some investors took off bets they had made that the currency would keep falling. Some hedge funds started paring those bets after the dollar gained in New York trading on Friday even as U.S. stocks tumbled, said Bob Sinche, head currency strategist at Citibank.

"We decided to move some assets back" to the U.S. because of a slump in European shares and after the tumble in the dollar in recent weeks, said David Rossmiller, who oversees $3 billion as head of global fixed income at Deutsche Bank Private Banking. He said the bank sold some of its European share holdings Tuesday and bought U.S. stocks.

Gold, meanwhile, fell in part on expectations that a strengthening dollar will reduce gold demand from jewelry manufacturers and investors in Europe and Asia.

"Gold looks weak on all fronts," said Tony Roggina, a gold trader at VIT Trading Inc. in New York. "If the dollar continues to climb, gold will continue to adjust to that."

Gold had climbed to a 2 1/2-year high in early June, reaching nearly $328 an ounce, as a weakening dollar made the metal cheaper for buyers using other currencies, and as some investors fled stocks for perceived safer havens.

But gold has traded mostly in a narrow range of $310 to $325 since late May, unable to get much traction despite the continuing plunge in the stock market.

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