Dollar rises vs euro after Geithner remarks

By Wanfeng Zhou

NEW YORK (BestGrowthStock) – The U.S. dollar rose versus the euro in late trading on Monday after Treasury Secretary Timothy Geithner said the United States will not engage in dollar devaluation.

“It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to (be) competitive,” Geithner told Silicon Valley business leaders. “It is not a viable, feasible strategy and we will not engage in it.”

The prospects for further Fed easing has sparked a sell-off in the dollar in recent weeks and prompted some other countries to take actions to stem gains in their own currencies. That has fueled fears of global competitive devaluation.

Kathy lien, director of currency research at GFT in New York, said Geithner’s comments helped the dollar recover, although the move will likely be short-lived as investors expect the Fed further ease monetary policy next month.

“As long as U.S. monetary policy keeps the dollar the ugliest currency of them all, there will be more downside than upside risk before the November FOMC meeting,” she said.

Investors are more certain there will be further easing after Fed Chairman Ben Bernanke on Friday offered his most explicit signal yet the U.S. central bank was set to relax monetary policy further. The question now is the amount.

In late trading, the euro was down 0.3 percent at $1.3933, down from a more than eight-month high of $1.4161, hit on trading platform EBS on Friday. The session low on Monday was $1.3830 on EBS.

Next downside targets are technical support at $1.3825 and then the October 12 low of $1.3775. On the upside, traders said gains in the euro may be limited unless the currency can consistently close above the pivotal $1.40 mark.

The dollar index (Read more about the global trade. ) (.DXY: ) was up 0.2 percent at 77.219, after rising to 77.645. The rally needs to extend above its October 12 high of 77.93 to signal a short-term bottom is in place after Friday’s 10-month trough of 76.144, analysts said.

The index has lost more than 5 percent in the past month as investors increased their bets against the dollar on heightened expectations for the Fed to unveil a second round of quantitative easing.

With much of the impact of additional easing already priced in, analysts cautioned of the risk of a dollar rebound if the Fed announces asset purchases of less than $1 trillion or takes a more gradual approach after its November meeting.

“People priced in a little bit too quickly how much the Fed was going to do and now people are a little bit nervous about the magnitude,” said Mark McCormick, currency strategist at Brown Brothers Harriman in New York.

Data from the U.S. Commodity Futures Trading Commission showed speculators trimmed bets against the dollar in the latest week but still had hefty wagers against it. (IMM/FX: )

The dollar ceded ground against the yen, falling 0.3 percent to 81.26 yen and edging back toward a 15-year low of 80.88 hit on EBS last week.

(Additional reporting by Nick Olivari; Editing by Diane Craft)

Dollar rises vs euro after Geithner remarks