The US dollar remains under pressure on the foreign exchange markets, as the bombings in Turkey led to a nervous day on the world markets yesterday.
Share prices also edged lower in most European markets.
The euro rose above $1.19 yesterday - not far off Wednesday's $1.1977 high - despite some positive economic indicators from the US, and was holding around the $1.19 level in New York last night. Many market analysts expect the dollar to remain relatively weak over the coming weeks, possibly breaching the $1.20 barrier for the first time.
Meanwhile, share prices were modestly lower in most European markets, with investors selling shares and buying traditional "safe-haven" assets such as gold and bonds in the immediate wake of the news from Turkey.
The FTSE 100 index lost 0.2 per cent, the ISEQ index dropped 0.74 per cent and most continental markets also edged down. In New York last night, the Dow Jones shed 0.73 per cent.
Traders were also unsettled by the brief evacuation of the White House due to a security scare, with renewed attention being paid to the threat of terrorism to Western targets.
Some generally positive US data - including job claims figures and manufacturing survey data from the Philadelphia Fed - did little to boost the dollar. While it remains above the lows reached early on Wednesday, many market analysts believe it will remain weak, weighed down by fears over the US current account deficit and the risk of rising trade tensions.
The euro should trade in the $1.19 to $1.20 range up to the year end, according to Mr Niall Dunne, economist at Ulster Bank, who is forecasting that a continued weakening dollar trend could push the euro to $1.30 by the end of next year.
If this is correct, it would add to competitive pressure on Irish exporters selling to the US. Wholesale price figures published yesterday showed the export prices being obtained by Irish industry had fallen 10.2 per cent in the year to October, illustrating the intense pressure on the profit margins of many companies.
While many analysts have expressed concern about the rising US current account balance of payments deficit - now equivalent to about 5 per cent of US GDP - Mr Alan Greenspan, the Federal Reserve Board chairman, struck a more relaxed tone in a speech yesterday.
The increased sophistication of global financial markets means more investors who are more willing to invest abroad, he said. That, combined with the US dollar's status as a reserve currency worldwide, have raised the chances for a "benign resolution" to the imbalance. "There is, for the moment, little evidence of stress in funding US current account deficits," Mr Greenspan added.
In the wake of the announcement of new US tariffs on Chinese textile and clothing imports, Mr Greenpsan said it was "imperative" that emerging protectionism be vanquished before it hurts globalisation - which was key to the US coping with record trade deficits.
"Should globalisation be allowed to proceed, and thereby create an ever more flexible international financial system, history suggests that current imbalances will be defused with little disruption," he told a monetary conference sponsored by the Cato Institute and the Economist magazine.
"Some clouds of emerging protectionism have become increasingly visible on today's horizon," he said, saying this could "significantly erode" the flexibility of the global economy.
Meanwhile, China yesterday accused the Bush administration of attempting to score "cheap political points" ahead of next year's presidential elections and announced plans to raise tariffs on some US imports in a separate case. It has also said it could launch an appeal against the US move at the WTO. (Additional reporting, Reuters)
