My how things can change.
Just three weeks ago the dollar hit a six-year high against the yen and a two-year high against the euro amid signs of strength in the U.S. economy and talk that the Federal Reserve would raise interest rates sooner than expected.
But now the currency market's sentiment has turned against the dollar. The euro has rebounded 1.5 percent against the greenback since falling to its recent low. And the dollar has slid 1.9 percent against the yen.
The euro traded at $1.2685 near midday Friday, and the U.S. currency traded at 107.99 yen.
The U.S. stock market plunge hurt the dollar. And so did comments from Federal Reserve officials that global economic weakness might spill over into the United States, leading the Fed to push back its starting date for interest rate hikes.
"Any weakness in the U.S. [economic] data would affect the crowded dollar trade," James Kwok, head of currencies at Amundi Asset Management,
told The Wall Street Journal.
"The recent rise of volatility and volume in the [foreign exchange] market will increase the need for investors to consider hedging their currency risks."
Meanwhile, the dollar's strength in the third quarter put a dent in the earnings of some U.S. companies. A rising dollar curbs their profits by making their exports more expensive in foreign currency terms and their foreign revenue worth less when converted into dollars.
"Ninety days ago, we expected that currency would be a modest help to our revenue growth, but in September we saw a sharp move [against us]," IBM CFO Martin Schroeter said in an earnings conference call Monday,
Bloomberg reports.
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