| GEO Business|
Dollar rises against yen, euro
| Updated at: 1017 PST, Thursday, October 21, 2010|
TOKYO: The dollar leapt half a yen and climbed rapidly against the euro on Thursday after U.S. Treasury Secretary Tim Geithner said major currencies were roughly in alignment now, although it later gave back some of its gains.
The dollar rose as far as 81.84 yen from about 81.00 yen before the comments came out and the euro fell 0.6 percent in a matter of minutes as the market, taking the comments to imply that the dollar did not need to fall further against major currencies, covered dollar short positions.
"It's become a bit difficult to test the dollar's downside for now," said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust Bank.
"It seems as if the G7 has formed a united front ahead of the G20 meeting, as he's saying he's mainly focusing on emerging economies when it comes to currencies."
In an interview in the Wall Street Journal, Geithner divided currencies into three categories, with the first, including China's yuan, undervalued by any measure, while the second were of emerging economies with flexible exchange rates that intervene or impose taxes.
The third was the major currencies, "which are roughly in alignment now," he was quoted as saying.
The dollar later retreated to 81.25 yen, up just 0.2 percent on the day, as the market examined the comments more closely.
The Wall Street Journal said the comments suggested that Geithner saw no need for the dollar to sink more than it already had against the euro and the yen, but traders pointed out that he did not say that exactly.
The euro, which fell as far as $1.3872, recovered to $1.3932, down 0.2 percent on the day.
The dollar has fallen to record lows against the Swiss franc, hit parity with the Australian dollar and dropped to 15-year lows against the yen in the past month, driven down by the market in anticipation of more quantitative easing from the Federal Reserve possibly as soon as November.
Talk of competitive currency depreciation has flared up ahead of a G20 finance ministers meeting this week and a G20 summit next month, as developed countries keep monetary policy extremely easy to shore up sluggish growth and as capital flows in search of better yields push up currencies in faster growing emerging economies.