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Dollar rises vs. yen, euro
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October 20, 1999: 3:42 p.m. ET
A strengthening stock market lends support to the U.S. currency
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NEW YORK (CNNfn) - The dollar rose strongly against the major currencies Wednesday as a strengthening U.S. stock market lured overseas investors into dollar denominated securities.
Just before 3:15 p.m. ET, the dollar rose to 106.50 yen from 105.34 Tuesday, a 1.09 percent gain in the dollar's value. It cost $1.0736 to buy one euro, down from $1.0828 Tuesday, a 0.84 percent rise in the U.S. currency's value.
The dollar's gains, analysts said, reflect a flood of overseas money into recovering U.S. stocks, which must be purchased in dollars. The gains also come from dollar buying by currency traders hoping to profit from this influx of overseas money.
"Our market watches the equity market very closely," said Tom Benfer, global currency analyst at the Bank of Montreal. "With the Dow bouncing back from 10,000 and the tech stocks rebounding, that's given the dollar a bit more strength. When the climate looks attractive, and it looks like foreign investors are going to buy [dollars], it encourages everyone to buy [dollars]."
U.S. stocks rose Wednesday, following one of the worst weeks ever for the Dow Jones industrial average.
Analysts also said Wednesday's weaker-than-expected German business confidence survey helped the dollar rise against the euro, reversing the European currency's recent gains.
The weak German business survey "gave some people an excuse to take profits after the euro's recent rally," said Alex Beuzelin, market analyst at Ruesch International.
Explaining the dollar's strength, analysts also cited news that the trade deficit narrowed slightly in August.
In the day's most closely watched economic indicator, the Commerce Department said the trade deficit narrowed more than expected to $24.1 billion from $25.18 billion a month earlier.
Until August, the deficit had widened to records for the last several months as a strong dollar and Americans' appetite for overseas goods kept the pace of imports ahead of exports.
Imports still far outpace exports. But August's export strength suggests that a slight weakening of the dollar in August coupled with rebounding overseas economies is starting to stoke U.S. manufacturing. But Americans' appetite for overseas goods remains strong.
Treasurys unmoved by trade news
As such, Treasury bonds showed little reaction to the report. Just before 3:15 p.m. ET, the benchmark 30-year bond rose 4/32 to 97-3/32. Its yield, which moves inversely to the price, fell to 6.34 percent from 6.35 percent Tuesday. Shorter-dated Treasurys moved lower.
"This is always a difficult number for the market to deal with," said Josh Stiles, bond strategist at IDEA Global.com.
The data, Stiles said, could inch up projections for the third-quarter gross domestic product. A rise in GDP, in turn, could provoke the Fed to raise rates.
The trade data, said Tony Crescenzi, bond strategist at Miller Tabak & Co., adds weight to the belief that overseas economies are recovering.
"There is a revival in global growth now underway that is lifting the U.S. manufacturing sector and hence, commodity prices and wages," Crescenzi said.
At the same time, Crescenzi noted that half the export gains came from aircraft orders.
"One should not infer from the August data that a major export spurt has begun," Donaldson Lufkin & Jenrette said in an e-mail to clients. "Exports were buoyed, as noted already, by aircraft exports. These aircraft exports reflect deliveries of aircraft ordered last year." 
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