Dollar Skids as Traders Follow the Lead Of Falling U.S. Stock and Bond Markets
NEW YORK -- Currency traders took their cue again from falling U.S. stock and bond markets and sold the dollar against most major currencies.</br></br>Analysts cited Wall Street Journal articles which fanned fears that foreign investors and U.S. mutual funds might cut back on the huge amount of money they've put into U.S. asset markets.</br></br>Also, early in Asian trading Wednesday, the Australian dollar dove immediately after the Reserve Bank of Australia surprised markets by cutting the key cash rate to 6% from 6.5%, citing an improved inflation outlook and a strengthening currency. After its initial fall, the Australian dollar stabilized just above 79 (U.S.) cents for the rest of the global trading day.</br></br>Traders sold U.S. dollars in Asia and Europe, reflecting worries that U.S. stock markets would open with a plunge. When prices did indeed fall sharply in early New York Stock Exchange trading, New York traders continued to sell the U.S. dollar. By the end of the global trading day, it was down more than one pfennig and almost half a yen.</br></br>The suggestions that investors might pull away from U.S. assets coincide with "fear [that stocks] are flying" too high, said David Munro, economist at High Frequency Economics in Valhalla, N.Y. But with a strong U.S. economy, "it's hard to make much of a case for a depreciation or loss in the dollar," he said.