Dollar slides on weak GE earnings, G7 awaited

LONDON - The dollar fell broadly on Friday, extending losses after disappointing quarterly results from US industrial conglomerate General Electric fanned worries about the US economy.

By (Reuters)

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Published: Fri 11 Apr 2008, 6:36 PM

Last updated: Sun 5 Apr 2015, 11:37 AM

The dollar’s slide was particularly pronounced versus the yen as GE’s results knocked a tentative pickup in risk appetite.

Meanwhile, the euro closed in on this week’s record high, supported in part by speculation that Group of Seven financial officials may not make a coordinated effort to talk up the dollar when they meet later in the day.

GE reported an unexpected 6 percent drop in profits -- with earnings per share undershooting expectations by 15 percent -- citing the slumping US economy and global credit crisis that started in August last year.

“The recent improvement we’ve seen in risk appetite in the market remains built on very fragile ground. Clearly there’s still great concerns over US earnings coming out in the coming quarter,” said Lee Hardman, currency economist at BTM UFJ.

He added that currencies like the yen would likely rise in the coming months as the recent pick up in risk appetite continued to dissipate.

The dollar fell 0.5 percent to 101.17 yen shortly after GE’s announcement. The euro was up 0.6 percent at $1.5838 nearing a record high of $1.5902 hit in the previous session, according to Reuters data.

The euro hit a record high versus sterling at 80.34 pence.

G7 eyed

Investor focus was turning towards the G7 meeting in Washington and speculation that efforts to mend global financial markets may continue to take priority over currency volatility.

”Official comments on currencies seem to have died down a bit before the meeting, with the exception of Trichet yesterday,” said Simon Derrick, head of currency research at Bank of New York Mellon.

“The likelihood is that were will be no change to the currency communique.”

The euro was also supported by European Central Bank concerns about inflation, which had prompted it to hold interest rates at 4 percent on Thursday and will likely prevent it from cutting for a while.

The euro has gained nearly 9 percent against the dollar since the start of this year on the view that the single European currency will maintain its yield advantage, given that many do not anticipate an ECB rate cut until at least summer.

By contrast, the Federal Reserve is seen cutting rates further from 2.25 percent.

Analysts said US officials were unlikely to call for a pause in the dollar’s plunge, given that a weak dollar at the moment is not seen exacerbating weakness in the US economy.

On the data front, investors were awaiting the Reuters/University of Michigan’s consumer sentiment survey due at 1355 GMT, given that consumer optimism about the economy has soured.

The preliminary reading for April’s index is expected to come in at 69.0, compared with 69.5 in March.

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