Dollar Ends Decline Versus Euro as Charts Signal Drop Excessive

Quoted from http://www.bloomberg.com/apps/news?pid=20601083&sid=awWiPScIXyyA&refer=currency:

Bloomberg.com: Currencies

Nov. 1 (Bloomberg) -- The dollar snapped seven days of losses against the euro on speculation the currency's 1.6 percent decline over the past month was too fast as the Federal Reserve signaled it may be done with cutting interest rates.

The U.S. currency rebounded from a record low versus the euro as the Fed's statement following yesterday's quarter- percentage point cut in rates said ``the upside risks to inflation roughly balance the downside risks to growth.'' A chart traders watch to predict currency moves rose above a level that suggests the euro was about to reverse course.

``We could see an adjustment lower in the euro against the dollar,'' said Hiroshi Yoshida, a foreign-exchange trader at Shinkin Central Bank in Tokyo. ``There are technical signs the euro's gains and the dollar's losses have gotten out of hand.''

The dollar traded at $1.4465 per euro at 11:30 a.m. in Tokyo compared with $1.4487 yesterday, when it touched $1.4504, the weakest since the European currency's debut in January 1999. The U.S. currency was little changed at 115.45 yen. The dollar may rise to $1.4430 against the euro today, Yoshida forecast.

The euro's relative strength index against the dollar, a comparison of the magnitude of gains and losses, has been above 70 over the past three trading days.

The U.S. dollar recouped losses against the Australian dollar, South African rand and the Canadian dollar, currencies that have benefited from increased demand for their nations' commodities.

Commodity Currencies

They were also favored destinations for investors in the carry trade, which involves borrowing funds at low rates in countries such as Japan and buying higher-yielding assets elsewhere.

The Australian dollar bought 93.09 U.S. cents, down from a 23-year high of 93.43. The rand was at 6.5035 per dollar from 6.4986 yesterday and the Canadian dollar traded at $1.0573 from $1.0603.

Australia's benchmark interest rate is 6.5 percent, compared with 10.5 percent in South Africa and 4.5 percent in Canada. Japan's benchmark rate is 0.5 percent while the European Central Bank's is 4 percent.

``There's talk of speculators buying back dollars they sold before the Fed meeting,'' said Osao Iizuka, head of foreign- exchange trading at Sumitomo Trust & Banking Co. in Tokyo. ``This is likely a temporary adjustment to the speed of the dollar's recent decline.''

The dollar may advance to $1.4420 against the euro today, he said.

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net ; Kosuke Goto in Tokyo at kgoto2@bloomberg.net