Dollar buoyed by slide in crude oil prices

LONDON (AFP) - The dollar garnered support from a slide in crude oil prices.
The single European currency stood at 1.2712 dollars in early European trading against 1.2706 late on Wednesday in New York.
The dollar was quoted at 106.36 yen compared with 106.37 on Wednesday.
The US currency received a fillip as oil prices slumped by about five percent Wednesday on news of a surge in US crude oil stockpiles, driving the euro down one percent in just hours to as low as 1.2681 dollars on Wednesday.
The euro had scaled an eight-month summit of 1.2842 dollars overnight Monday-Tuesday before the greenback bounced back.
In the absence of any significant US data, the market's focus will continue to be "squarely" on the oil price, said Steve Pearson, chief currency strategist at HBOS.
Overall though, Pearson said it is "remarkable" the extent of the market's sensitivity to "what, in the larger scheme of things, are essentially marginal changes" in the oil price.
"Nevertheless, while oil is on the slide a better bid to global equities at the expense of bonds is likely," he said.
"This in turn should feed through to some pressure on defensive currencies (eg euro, swiss franc) to the benefit of the more growth sensitive (eg yen, dollar and even sterling)," Pearson added.
However, analysts said overall dollar sentiment remained weak on continuing concerns about the US economy and the associated trade deficit, as well as uncertainty surrounding next week's US presidential election.
With the polls showing Senator John Kerry and President George W. Bush locked in a very tight battle for control of the White House, concerns are mounting that the United States will suffer a prolonged period of post-election uncertainty.
The slide in the oil price has merely introduced some "two-way risk" into the dollar's fortunes against the euro, said Daragh Maher, senior forex strategist at CALYON.
However, in the longer term, Maher thinks that it could "perversely" allow the euro to rise even higher than might otherwise have been the case, with a more steady rise likely to cause less concern at the European Central Bank.
"After all, an orderly rise in the euro, rather than a rush for the exit from the dollar, is less likely to provoke a strong response in terms of ECB rhetoric," he said.
"So barring a move below 1.2640 dollars today (Thursday), we retain our view that the euro will move back towards its all-time highs in the near term," he added.
The euro was changing hands at 1.2712 dollars from 1.2706 late on Wednesday in New York, 135.22 yen (135.18), 0.6947 pounds (0.6949) and 1.5329 Swiss francs (1.5342).
The dollar stood at 106.36 yen (106.37) and 1.2057 Swiss francs (1.2070).
The pound was at 1.8302 dollars (1.8276), 194.66 yen (194.39) and 2.2064 Swiss francs (2.2059).
On the London Bullion Market, the price of an ounce of gold stood at 423.95 dollars against 428.25 on Wednesday afternoon.

10/28/2004 - 11:28 GMT - AFP