Reply #78: Dollar Ends Three-Day Rally Versus Euro, Falls Against the Yen

[UpInArms]

http://www.bloomberg.com/apps/news?pid=10000101&sid=afAGE4BqYCzM&refer=japan

Jan. 5 (Bloomberg) -- The dollar ended a three-day rally versus the euro and fell against the yen as investors resumed bets the U.S. currency will decline in coming months.

The dollar's advance against the European currency stalled even after the Federal Reserve said yesterday its target interest rate is less than needed to slow inflation after five increases last year. An industry report showed U.S. services industries expanded in December at the fastest pace in five months.

``The overall view remains that the dollar has to weaken, and the cyclical arguments such as economic growth and interest rates probably are not yet enough to turn the tide,'' said Michael Klawitter, a currency strategist at WestLB AG in Dusseldorf, Germany. ``I would rather buy euro-dollar at these levels, and I'd be very cautious to continue selling now.''

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The U.S. currency last year dropped 7.1 percent against the euro and 4.3 percent versus the yen. Against a basket of six major currencies, the dollar fell 7 percent in 2004, hurt by concern record U.S. current-account and budget deficits will undermine demand for the currency.

``The dollar will weaken further against the euro and the yen before it gets stronger,'' said Paul Chertkow, head of currency strategy at Bank of Tokyo Mitsubishi in London, Japan's second-largest lender. ``The key point at the moment is still on structural factors, especially the U.S. current-account deficit.''

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