20000401

Dollar pulled

down by

declining US stocks

NEW YORK: The dollar lost ground against most European currencies and the Japanese yen.

The euro bounced up against the dollar.

The weakened dollar was attributed to the declines in US stocks, led by a big self-off on Thursday on the Nasdaq Stock Market. The Nasdaq index fell 186 to 4,457, a loss of 4 percent.

In late New York trading, the euro was quoted at 96.13 cents, up from 95.17 cents late Wednesday.

But the dollar fell to 105.46 Japanese yen from 105.81 yen Thursday. Yen buyers were encouraged by the industrial output data, which suggested the parts of Japan's ailing economy may be moving toward recovery.

In other trading, the dollar was quoted at 1.6576 Swiss francs, down from 1.6751, and 1.4554 Canadian dollars, up from 1.4575. The dollar fell against the British pound, which fetched dollars 1.5954, compared with dollars 1.5944 late Wednesday.

Despite the slight decline, analysts remained upbeat on the dollar following Wednesday's government report showing US economic growth of 7.3 percent in the fourth quarter of 1999, saying the resulting higher likelihood of a hike in US interest rates would likely attract dollar buying.

"Growth is too fast for the Fed. We expect them to tighten again in May," said Stan Shipley of Merrill Lynch in New York.

However, Citibank analyst Robert Sinche said the euro meanwhile could stabilise and bounce back, and he questioned whether any rise in US interest rates would offset potential rate increases in Europe.

"It is the imbalance in domestic demand over supply in the US, heavily impacted by the equity wealth effect, that appears to be driving expectations about Fed tightening, he said.

"The recent surge in equities has driven the market to anticipate more tightening by the Fed than by the ECB (European Central Bank) over the net six months (but) we continue to look for equal moves by the ECB and Fed," the Citibank analyst said.

The dollar also slipped to 1.6561 Swiss francs from 1.6744 Wednesday, while the pound sterling edged up to 1.5957 dollars from 1.5930. The Nasdaq composite index plunged 186.42 points (4.01 percent) to close at 4,458.25 Thursday, the fifth biggest point-drop in the history, while the Dow Jones Industrial Average fell a more modest 38.16 points (0.35 percent) to 10,980.56.

The drop was taken as a continuation of the recent slump in the "new economy" shares of high-technology companies, which analysts increasingly have begun to consider overvalued, and a shift back to traditional blue-chip stocks.-AP/AFP