Euro Nears Parity With Dollar On Xerox Concern

London, June 28: | Updated: Jun 29 2002, 05:30am hrs
The euro rose to within a quarter cent of parity with the dollar on Friday as fresh US corporate accounting concerns, this time at office equipment maker Xerox, hit the greenback across the board.

Xerox said on Friday it expected a revenue restatement of around $two billion over the five-year period between 1997 and 2001.

The news follows telecoms giant WorldCom’s admission this week that it had improperly accounted for nearly $four billion.

The dollar also fell to a nine-month low against the yen as the revelations further battered confidence in corporate America and the ability of the US to keep drawing in enough overseas capital to finance its huge current account deficit.

“The dollar’s come under more selling pressure and this is liable to continue. The news about Xerox just doesn’t help,” said Mr Neil Parker, market strategist at RBS Financial Markets.

At 1026 GMT, the dollar was trading at $0.9979, up one per cent on the day and at its highest level since February 2000. The dollar also hit its lowest level against the Swiss franc since October 1999 around 1.4750 franc.

The dollar also fell to a nine-month low below 118.50 and traders remained wary that the Bank of Japan could intervene to sell yen for the third day this week.

Japanese authorities have sold yen for dollars on two days already this week, concerned that a rise in the yen could derail Japan’s nascent export-led recovery.But dealers are increasingly sceptical about the effectiveness of such steps as the dollar has continued to drop even after inter-vention.

Euro zone inflation stood at 1.7 per cent in June compared to a year earlier, its slowest rate since December 1999, according to an early estimate released on Friday.

Dealers said market psychology had shifted so far against the dollar that no one wanted to go into the weekend with long dollar positions.

“The market is still short of dollars and is prepared to go into the weekend like that,” said Mitul Kotecha, head of foreign exchange research at Credit Agricole Indosuez. “Clearly no one has any faith in the dollar.” Comments by international financier George Soros that the dollar could shed a third of its value in the coming years further undermined sentiment towards the greenback, which has already fallen 10 per cent against the euro and the yen this quarter.Concern over the strength of the US recovery and corporate accounting standards have weighed heavily on the dollar in recent weeks.

Reuters