Originally created 01/23/04

Dollar suffers third straight day of losses



NEW YORK - The dollar continued to erase last week's gains on Thursday, with the euro climbing within two cents of its record high of about $1.29.

Three days of losses have put expectations of a sustained correction for the U.S. currency on the back burner, with investors growing less leery by the day of potential action by euro-zone officials to counter euro strength.

"People hoping for a deeper euro correction have run out of patience," said Sean Callow, currency strategist at IDEAglobal, a financial market research firm in New York.

The prospect of a cut in interest rates by the European Central Bank is unlikely, while "it's a bit hard to believe that intervention is going to happen" before the euro breaks through the highs hit last Monday and approaches $1.30, Callow added.

Indeed, market perceptions have shifted significantly since ECB President Jean-Claude Trichet's warning last week about "brutal" currency moves helped send the dollar on a five-cent rally against the euro.

In the wake of his speech, other euro-zone officials have presented a much more mixed message about concern over the strength of the euro and its potential threat to the region's economic recovery.

The ECB reiterated in its January monthly bulletin published Thursday that it is "concerned about excessive exchange-rate moves."

But the central bank showed little inclination of changing its interest rate outlook, saying, "The current stance of monetary policy is appropriate to preserve price stability over the medium term."

Patrick Brodie, chief dealer at Sumitomo Mitsui Banking Corp. in New York, said little of the recent official commentary out of the euro zone has been supportive for the dollar.

But uncertainty about the outcome of the Feb. 6-7 meeting of the Group of Seven leading industrial nations will keep investors wary about gunning for new lows in the dollar, he added.

"I think the G7 is going to have to agree to disagree in terms of the role of intervention," Callow said.

In late New York trading, the euro was quoted at $1.2711, up from $1.2633 late Wednesday. The dollar was quoted at 106.08 yen, down from 106.91 yen late Wednesday. It fell to 1.2337 Swiss francs from 1.2403, and to 1.2946 Canadian dollars from 1.2988. The British pound rose to $1.8443 from $1.8295.