Dollar stages another revival

The dollar regained earlier losses in late trade yesterday after US stocks bounced back following another dramatic sell-off at the opening bell, dealers said.

With the Dow Jones index of leading shares trading higher after sliding 170 points at the opening, the euro eased to $0.9945 after rising as high as $0.9976, up from $0.9884 late Tuesday in New York.

After piercing $1 for the first time in almost 2½ years last week, the single European currency this week has slipped back below the symbolic one-to-one level as US financial firms repatriate their funds from overseas.

The Wall Street revival is not expected to last long with investors still fleeing the US market.

"Investors lost confidence in corporate America," said Mr Hans Redeker, global head of forex research at BNP Paribas.

"European insurance companies are under pressure now to squeeze their American equity portfolios and they are accompanied by private investors who are pulling out of the US markets."

He added that these investors were repatriating their profits from US markets to the euro zone, thus supporting the euro's value against the dollar. Reaction to rumours that the US Federal Reserve might hold an emergency meeting to raise interest rates was limited. "Only one month ago [Fed chairman\] Alan Greenspan calmly asserted that everything in the economy is under control and thus he is not expected to intervene that soon," said Mr Redeker.

However, if the Fed intervened by lowering the interest rate, this would be cheered by European markets. Dresdner Kleinwort Wasserstein economist Mr Paul Mackel said: "A rate cut is needed to stabilise equity markets."