WORLD FOREX: Dollar Claws Back From Multi-Month Lows

NEW YORK (Dow Jones)--The dollar is clawing back from multi-month lows against the euro and yen Wednesday morning, but currency analysts warn not to be fooled by this resilience.

The dollar is getting some support on wavering U.S. stocks, which are encouraging traders to pare back riskier positions in higher-yielding assets that advanced overnight.

The dollar is currently the lowest-yielding currency and stands to benefit from this bout of repositioning.

However, analysts say this dollar rebound isn't the start of a new trend.

"The fact that the dollar has clawed back some ground here, I don't think is important," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon.

"It is well within normal fluctuations of the day's range," he said, adding "the trend in the dollar is lower."

Woolfolk echoed the sentiment of other analysts, who said that it wouldn't be surprising to see stocks rally later in the day. Therefore, it wouldn't be surprising to see the euro reach a new 12-month high above $1.4720.

Recently, the dollar bounced back from a seven-month low of Y90.12 to an intraday high of Y91.35.

The move in the dollar against the yen lead the euro higher too. The euro gained to an intraday high of Y133.89.

The yen may also be slipping some after a sharp move overnight on comments from incoming Japanese Finance Minister Hirohisa Fujii. He said the recent foreign exchange market "is not fluctuating wildly" and therefore doesn't call for an intervention.

There had been a previously long-held assumption that Japan would prevent a strong yen. But analysts say the probability of this is declining.

Late Wednesday morning in New York, the euro was at $1.4661 from $1.4667 late Tuesday, according to EBS via CQG. The dollar was at Y91.26 from Y91.06. The euro was at Y133.80 from Y133.60. The U.K. pound was at $1.6482 from $1.6495, while the dollar was at CHF1.0362 from CHF1.0340. Link...