Dollar propped up in late trade by intervention
The dollar gained a temporary respite in late trade after the Federal reserve and the European Central Bank intervened on behalf of the Bank of Japan (BOJ) to weaken the yen, dealers said.
This afternoon euro was worth 0.9867 of a dollar down from 0.9975, while the dollar was worth 119.99 yen up from 118.51.
Dealers estimate that the combined total of the intervention was 1-2 billion dollars. Although the estimated sum was small in comparison to the amounts involved in the recent string of interventions, the surprise factor added clout to the action.
"It caught the market by surprise," Mr Will Rugg, senior currency strategist at Standard & Poor's MMS said.
The move served to prop up the ailing dollar, which has been hovering close to parity for much of the day, slipping to within seven ticks of parity with the euro at lunchtime.
"This will put off parity for the meantime," Mr Rugg said.
The dollar fell by over 1.5 cents against the euro as more bad news piled up against the US currency.
Confirmation from Xerox that it is to reduce its pretax income by $1.4 billion after an audit, came as the latest in a long line of accounting scandals at major US companies.
However, US equities have managed to hold up relatively well, giving the dollar some temporary relief, and fending off the prospect of parity by the weekend.
With July 4th around the corner, the threat of further terrorist attacks against the US could be another catalyst to push the euro to parity against the euro.
The BOJ has intervened in the markets a number of times over the last month as the yen prospered, but has not been able to halt the tide, given the dollar's general weakness.
The ECB has confirmed it was involved at around 3.00 p.m. but the Fed refused to comment.