Dollar Falls Versus Yen as Gulf States May Discuss Revaluing

By Stanley White and David McIntyre


Nov. 19 (Bloomberg) -- The dollar fell against the yen on speculation the six Gulf Arab states that peg their currencies to that of the U.S. will consider revaluing.

The Gulf Arab states will discuss a proposal next month to revalue their currencies, Abdul Rahman al-Attiyah, the secretary general of the Gulf Cooperation Council, said yesterday. Saudi Arabia, the biggest member of the group, has no plans to change its exchange rate against the U.S. currency, according to Finance Minister Ibrahim al-Assaf. The dollar also fell before a report today that is likely to show home-builder confidence in the world's biggest economy fell to a record low this month.

``The U.S. dollar is weaker across the board on the talk of a move away from the dollar peg,'' said Sue Trinh, a senior currency strategist in Sydney with RBC Capital Markets, the second most accurate exchange rate forecaster in the second quarter, according to Bloomberg data. ``The bearish dollar sentiment will continue with the housing data.''

The dollar fell to 110.85 yen at 8:50 a.m. in Tokyo from 111.09 late in New York on Nov. 16. The U.S. currency was at $1.4670 per euro from $1.4662 late last week. It fell to 89.74 U.S. cents per Australian dollar from 89.29 U.S. cents. The euro was at 162.61 yen from 162.86 yen. Initial support for the dollar was at 110.70 yen and $1.4685 per euro, Trinh said. Support is an area where buy orders may be clustered.

The U.S. National Association of Home Builders/Wells Fargo index of builder confidence probably fell to a record-low 17 this month from 18 in October, according to the median estimate of a Bloomberg News survey. The report will be released at 2 p.m. in Washington.

GCC Currencies

The proposal to change the value of the currencies of the Arab nations will be considered when heads of state of the GCC attend a summit in Doha, Qatar, on Dec. 3-4, al-Attiyah said.

The GCC comprises Saudi Arabia, the U.A.E, Qatar, Oman, Bahrain and Kuwait. The first five peg their currencies to the dollar, while Kuwait links its to a basket.

The Bahraini dinar rose 0.2 percent to 0.3759 per dollar, while the Saudi riyal advanced 0.1 percent to 3.725 against the U.S. currency.

Losses in the dollar against the euro may be limited as some investors reduced bets on the currency before a Thanksgiving break this week in the U.S., said Yuji Saito at Societe Generale SA.

Buy Back Dollar

``Investors will buy back the dollar to reduce short-dollar positions, going into the long break,'' said Saito, head of the foreign-exchange sales department in Tokyo at France's third- biggest lender. ``Traders want to close the positions to some extent before that.'' Short positions are bets that a currency will fall.

The U.S. currency may move between $1.46 and $1.47 a euro today, Saito said.

Futures traders decreased their bets that the dollar will fall against the euro, figures from the Washington-based Commodity Futures Trading Commission showed on Nov. 16.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 69,429 on Nov. 13, compared with net longs of 76,048 a week earlier.