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U.S. dollar bounds upwards on news of Osama bin Laden’s death

By Agence France-Presse
Monday, May 2, 2011 9:06 EDT
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TOKYO (AFP) – The US dollar rose in Asian trade on Monday after news that Al-Qaeda leader Osama bin Laden had been killed nearly 10 years after the September 11 attacks, but analysts warned that sentiment would fade.

The euro, which benefited from speculation there will be a series of interest rate hikes by the European Central Bank this year, came under selling pressure against the dollar on the bin Laden news and a fall in oil prices, dealers said.

The euro eased to $1.4764 from $1.4864 in earlier trade, before rebounding slightly to $1.4795. The dollar rose to 81.66 yen from 81.19 earlier, before easing back to 81.41.

US President Barack Obama said in a dramatic televised address that the Al-Qaeda leader had been killed in an operation near Islamabad, Pakistan.

The United States has been hunting bin Laden for years, an effort that was redoubled following the attacks on the World Trade Center in New York and the Pentagon, which killed 3,000 people in 2001.

Investors unwound short dollar positions on falls in crude oil prices on the news of the death of the Al-Qaeda leader, Tomohiro Nishida, senior dealer at Chuo Mitsui Trust and Banking, told Dow Jones Newswires.

However, analysts were mixed as to whether the news would provide a longer term boost to the greenback.

The dollar’s recent weakness has been on the view that the Federal Reserve “is still far away from monetary tightening, even though the US economy is continuing to show signs of recovery,” said Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ.

The death of bin Laden “is not going to help the dollar” longer-term, said Daisuke Karakama, market economist at Mizuho Corporate Bank.

“The Fed policy is far more critical for the dollar… The dollar will stay weak against currencies excluding the yen” whose interest rates are likely to stay ultra-low for long time, he said.

However, Kurt Magnus, executive director of forex sales at Nomura in Australia, said the death of the Al-Qaeda leader could boost optimism in the US. “This is a shot of adrenalin into the arm of the US economy.”

Many markets were closed in Asia on Monday for a public holiday, obscuring what is likely to be a move of support for the US dollar, dealers said.

The dollar was mixed against other currencies.

The Korean won was lifted to its highest level against the dollar in 32 months after South Korea’s exports surged 27 percent in April from a year earlier. The dollar fell past 1,070 Won to hit 1,066.70.

The dollar was flat against the Singapore dollar at Sg$1.2230, but declined against the Indonesian rupiah to 8,548 from 8,563. It edged higher against the Thai baht to 29.86 from 29.85.

It was flat against the Taiwan dollar at Tw$28.67.

Agence France-Presse
Agence France-Presse
AFP journalists cover wars, conflicts, politics, science, health, the environment, technology, fashion, entertainment, the offbeat, sports and a whole lot more in text, photographs, video, graphics and online.
 
 
 
 
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