The dollar gained versus the euro, erasing earlier losses, on
speculation foreign investors in U.S. stocks bought the dollar at the
end of the month to keep their currency hedge ratios constant, said
Shaun Osborne, chief currency strategist at TD Securities Inc. in
Toronto.
``Foreign investors buying U.S. equities sell the dollar as a hedge,''
said Osborne. ``Because the value of the stocks has declined so much,
they have to buy back the dollar to maintain their hedge ratios.''Gross
domestic product shrank 0.3 percent in the third quarter, its biggest
decline since the 2001 recession, the Commerce Department reported
today in Washington. The median forecast of 75 economists surveyed by
Bloomberg News was for a 0.5 percent drop.
``The easing bias in the U.S. is going to continue,'' said Paresh
Upadhyaya a portfolio manager in Boston at Putnam Investments, which
manages $50 billion in currency assets.
The yen fell against the dollar as global interest-rate cuts sparked
gains in stocks, boosting demand for higher-yielding assets funded by
loans in Japan.
Japan's currency also weakened on speculation the Bank of Japan will reduce borrowing costs tomorrow.
``The market is getting benefits from all the positive measures the
central banks are taking,'' said Alan Ruskin, head of international
currency strategy in North America at RBS Greenwich Capital Markets
Inc. in Greenwich, Connecticut. ``I see risk appetite improving in a
choppy fashion in the coming month and some moderate weakness in the
dollar and the yen.''