Forex View -- Next Flashpoint: Rates or Growth?
NEW YORK -- Plunging commodity prices and renewed anxiety about the financial health of some euro-zone nations sent the euro and other risk-related currencies into a funk against the dollar last week.</br></br>That has left traders wondering whether to continue focusing on interest-rate differentials or to switch to concerns about the outlook for global economic growth and the risk of more turmoil in European debt markets.</br></br>"Right now we are all on tenterhooks because we don't know which direction we are going to go," said David Watt, senior currency strategist in Toronto at RBC Capital Markets</br></br>The U.S. currency has gotten a lift from the notion that Chinese-led global growth could be slowing more than once thought, a scenario that points to a further unwinding of bets on emerging-market and commodity-sensitive currencies. On Monday and Tuesday, as the focus turns to talks among European Union finance ministers over the bailout programs for the debt-ridden governments of Greece and Portugal, the dollar could get another boost if discussions leave investors disappointed and fearful of another breakdown in euro debt markets.</br></br>It was revealing, said Vassili Serebriakov, foreign-exchange strategist at Wells Fargo in New York, that the euro fell 1% against the dollar and the yen Friday even as euro-zone gross-domestic-product data were stronger than expected.