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| Recent rebounds in the dollar have proved to be
short lived |
The US dollar has dropped against major currencies on concerns that
central banks may cut the amount of dollars they hold in their foreign
reserves.
Comments by South Korea's central bank at the end of last week have
sparked the recent round of dollar declines.
South Korea, which has about $200bn in foreign reserves, said it plans
instead to boost holdings of currencies such as the Australian and
Canadian dollar.
Analysts reckon that other nations may follow suit and now ditch the
dollar.
At 1930 GMT, one euro was worth $1.325, up 1.46% on the day.
The British pound had added 0.76% to reach $1.91, while the dollar had
fallen by 1.25% against the Japanese yen to trade at 104.2 yen.
At the start of the year, the US currency, which had lost 7% against
the euro in the final three months of 2004 and had fallen to record lows,
staged something of a recovery.
The comments from Korea come at a time when sentiment towards the
dollar was already softening
Analysts, however, pointed to the dollar's inability recently to extend
that rally despite positive economic and corporate data, and highlighted
the fact that many of the US's economic problems had not disappeared.
The focus once again has been on the country's massive trade and budget
deficits, with predictions of more dollar weakness to come.
"The comments from Korea came at a time when sentiment towards the
dollar was already softening," said Ian Gunner, a trader at Mellon
Financial.
On Tuesday, traders in Asia said that both South Korea and Taiwan had
withdrawn their bids to buy dollars at the start of the session.
Mansoor Mohi-Uddin, chief currency strategist at UBS, said that there
was a sentiment in the market that "central banks from Asia and the Middle
East are buying euros".
A report last month already showed that the dollar was losing its
allure as a currency that offered rock-steady returns and stability.
Compiled by Central Banking Publications and sponsored by the UK's
Royal Bank of Scotland, the survey found 39 nations out of 65 questioned
were increasing their euro holdings, with 29 cutting back on the US
dollar.
(Agencies) | 
Updated: 2005-02-23 09:03