Wednesday July 22, 07:07 PM
Dollar advances on risk aversion
LONDON (AFP) - The dollar advanced on the euro Wednesday as investors, anxious in the face of mixed US corporate results and renewed concerns about prospects for the US economy, sought refuge in the greenback.
The single European currency in late-day trade was at 1.4210 euros, down from 1.4227 late Tuesday in New York.
The dollar was meanwhile trading at 93.58 yen after 93.73 on Tuesday.
Trading sentiment was affected by an earnings report from US bank Morgan Stanley (NYSE: MS - news) , which revealed a worse-than-expected net loss of 1.25 billion dollars in the second quarter, the third straight monthly shortfall.
Re-enforcing the dollar's appeal in a time of economic uncertainty was Congressional testimony from Federal Reserve Chairman Ben Bernanke
Bernanke, delivering his semiannual economic report to Congress on Tuesday, cited "notable improvements" in financial markets and a somewhat brighter economic outlook but warned of considerable risks led by high unemployment.
"In light of the substantial economic slack and limited inflation pressures, monetary policy remains focused on fostering economic recovery," Bernanke told the House of Representatives Financial Services Committee.
Analysts said the comments were broadly positive but were still cautious.
"His emphasis was on economic risks and this cautiousness did not sit well with currency traders," said Kathy Lien, director of currency research at Global Forex Trading.
The euro was also under pressure from a report that factories in the 16 nations using the single currency saw demand fall May compared with April, contrary to expectations.
New industrial orders fell by 0.2 percent in May, the European Union's Eurostat data agency said, bringing the drop over 12 months to 30.1 percent. Analysts polled by Dow Jones (news) newswire forecast a rise of 2.0 percent in May.
"The risks for the euro are now building," said analysts at BNP Paribas (Paris: FR0000131104 - news) .
"The failure to take advantage of the more favourable market conditions over the past few days suggests that the euro will now be increasingly exposed as the news and data turns more negative.
In trading here on Wednesday, the euro was changing hands at 1.4210 dollars against 1.4227 dollars late on Tuesday, 132.83 yen (133.35), 0.8641 pounds (0.8635) and 1.5159 Swiss francs (1.5164).
The dollar stood at 93.58 yen (93.73) and 1.0682 Swiss francs (1.0657).
The pound was at 1.6423 dollars (1.6463).
On the London Bullion Market, the price of gold slipped to 948.25 dollars an ounce from 947.75 dollars an ounce late on Tuesday.
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