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Dollar Falls as Wall Street Prepares to Reopen
NEW YORK, Sept 15 (News Agencies) - Concern for the U.S. economy mounted as the dollar fell against the other major currencies Friday and as jittery global markets anticipated the reopening of Wall Street after an unprecedented four-day shutdown in the wake of deadly attacks, news agencies reported.
The dollar's decline allowed the euro to rise to $0.9215 at 4 p.m. EST from $0.9120 a day earlier. It also fell sharply against the Japanese currency to 117.18 yen from 118.78 yen on Thursday, according to Agence France-Presse (AFP).
Royal Bank of Scotland economist Neil Parker said that weak U.S. consumer confidence figures, published on Thursday and registered prior to the attacks, also weighed in on the dollar's performance.
Referring to the consumer confidence survey, he said: "That was taken before the attack on the U.S. and it just dropped like a stone and I think that is what created a lot of this selling pressure on the U.S. dollar."
New York's Stock Exchange trading floor will become the hub of the entire U.S. equity market for the time being, housing rival exchanges, such as the American Stock Exchange, which have been shut down since the collapse Tuesday of the World Trade towers.
But nervous markets around the world tumbled this week in response to the assault on the heart of American capitalism.
London shares slid more than six percent for the week to close at its lowest level in nearly three years and Tokyo was down 4.8 percent.
"What is beginning to weigh on sentiment is how U.S. equities might open on Monday," said Jeremy Batstone, head of trading at NatWest Stockbrokers in London.
"Despite the authorities endeavors to prevent shorting and volatility through market activity, prices will almost certainly have to be marked lower, initially anyway," he told AFP.
Boston-based Putnam Investments observed in an analysis released Friday that "while the direct economic damage inflicted by the attacks is relatively small in the context of the global economy, the psychological effects loom large."
In limited U.S. activity Friday, the bond market moved higher as investors looked for a safe haven from expected market turmoil.
Prudential Securities chief strategist Greg Smith called for calm, urging investors to avoid the temptation to sell off stock holdings.
"We believe that this is exactly the time to exercise patience and courage and stick to your long-term investment strategy," he said. "If you go back to past crises such as the Gulf War, you'll find that a 'knee-jerk' liquidation of equity holdings was a mistake, as the market snapped back within a few months."
Two massive pension fund systems, with combined assets of $2.1 trillion, echoed those comments, urging a calm response to the resumption of trading.
"We have unqualified confidence in the U.S. financial systems and in the resilience of the U.S. financial markets," said a statement from the National Association of State Retirement Administrators and the National Council on Teacher Retirement.
"We will remain patient long-term providers of capital. We remain confident in the underlying strength of the U.S. economy."
In a move expected to help shore up stocks, the Securities and Exchange Commission (SEC) said it would temporarily relax several of its rules, including those on company share buybacks and on mutual funds, who may now borrow from and lend to related parties.
In a statement released in Washington, the SEC said, "U.S. equities markets are the world's strongest and most vibrant, in spite of the heinous acts of last Tuesday."
It said it would also allow brokerage firms to calculate their net capital without considering the days the market was closed and relax requirements for face-to-face meetings for mutual fund boards.
Although some have predicted a massive impact of the attacks on everything from the airline industry to insurance - making a recession likely - economists say there could be a quick rebound if history is a guide.
The attacks "have taken a horrific human toll but will have little impact on the national economy," said a report by University of California Los Angeles economists Edward Leamer and Christopher Thornberg.
The economists said that even after devastating natural disasters such as the Northridge Earthquake, Hurricane Andrew and Hurricane Floyd, "a full recovery of income levels after each of these catastrophes took only a single quarter."
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