The dollar fell the most in two weeks against the euro after Treasury Secretary John Snow suggested the U.S. won't bolster its currency.
Exchange rates are best set by markets, Snow said late yesterday, failing to repeat a Jan. 7 remark that the Bush administration wants to "sustain the strength'' of the dollar. Last week's comment helped spur the currency's second-biggest weekly gain ever against the euro. The dollar fell for a third straight year in 2004.
"The administration's position remains the same; they favor a strong dollar but a dollar determined by the markets,'' said Hugh Walsh, a currency trader in New York at Fortis (USA) Financial Markets, a unit of Belgium's biggest financial-services company.
Well, the markets have spoken (for the moment, anyway). This from Reuters:
The dollar posted steep losses on Wednesday after news of a much wider-than-expected U.S. trade deficit fueled a selloff.
The November data highlighted structural economic imbalances that have trapped the dollar in a three-year decline and threaten to keep pressing the currency lower, especially given the size of the latest record deficit, analysts said.
Analysts, however, were also looking ahead to Thursday's U.S. retail sales data and Friday's report on producer prices, which could revert the focus back to supposedly dollar-supportive interest rate hikes by the Federal Reserve.
On the Federal Reserve front, CNNmoney had this to say about a speech earlier this week by Federal Reserve Bank of Atlanta president Jack Guynn:
Investors continued to favor long-term securities on the assumption that short-term debt would underperform longer-dated bonds.
This assumption may have been fueled by comments from Federal Reserve official Jack Guynn, which analysts interpreted to mean that rates may rise much faster than they had previously thought.
Guynn not only said that inflation would have to be kept in check, he added that the central bank did not pledge to raise rates at a measured pace.
All in a day (or two's) work.