Monday December 24, 2007 - 12:25:25 GMT
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FOREX NEWS-Yen at 6-wk lows on pre-Christmas risk appetite
Mon Dec 24, 2007 6:33am EST
(Changes byline, adds quotes, updates prices)
By Toni Vorobyova
LONDON, Dec 24 (Reuters) - The yen touched a six-week low
versus the dollar and fell against the euro on Monday, as a
pre-Christmas rally in equities made investors more willing to
place risky bets funded by cheap borrowing in the Japanese unit.
Sterling fell to a record low versus the euro for a second
successive trading session after weak UK housing market data
confirmed expectations of more Bank of England interest rate
cuts in 2008, perhaps as soon as next month.
In contrast to bets for lower rates in UK and U.S., euro
zone policymakers -- as illustrated by comments from ECB
president Jean-Claude Trichet on Monday -- have kept up a
Trading activity was set to be very light as Tokyo and some
European centres are closed for holidays.
U.S. stocks jumped on Friday as technology shares rallied
and the financial sector was helped by a report that brokerage
giant Merrill Lynch (MER.N: Quote, Profile, Research) could get up to $5 billion in
capital from Singapore state investor Temasek Holdings [TEM.UL].
This was followed by a rally in emerging market equities
.MSCIEF on Monday, supporting risk appetite, although European
shares were broadly flat .
High-risk assets also found support after the Financial
Times reported on its Web site that Saudi Arabia plans to
establish a sovereign wealth fund that may exceed $900 billion,
which would likely be the largest in the world.
"The improvement in risk gauges -- such as firmer equities
and softer bonds and drops in volatilities -- have helped propel
market risk sentiment which is helping the euro. The key thing
to watch here is euro/yen," said Lena Komileva, G7 market
economist at Tullett Prebon.
"Although holiday thin volumes mean that the market is
unlikely to challenge recent ranges," she added.
By 1106 GMT, the euro was up 0.2 percent at 164.31 yen
<EURJPY=>, its strongest in over a week.
The dollar touched a six week high of 114.20 yen, according
to Reuters data <JPY=>, but eased versus the euro to $1.4395
The improvement in investor risk demand supported
high-yielding currencies of Australia and New Zealand.
The Australian dollar rose to a one-week high of US$0.8720
<AUD=>, while the New Zealand dollar <NZD=> climbed 0.4 percent
BRICK WALL FOR STERLING?
The euro rose to a record high of 72.68 pence <EURGBP=>
after data from the Hometrack showed annual house price
inflation in England and Wales at its lowest in 1-1/2 years in
December -- adding to the picture of a slowing UK economy
potentially in need of a boost from lower rates.
"There are increasing signs that the British economy
has hit a brick wall triggered by the decline in the
housing market," BNP Paribas said in a research note,
forecasting that the euro would rise to 76 pence by the third
quarter of 2008.
In contrast to the BoE, the European Central Bank sees more
worried about inflation than growth, with Trichet saying in an
interview published on Monday that the ECB is determined to stop
increases in oil and food prices from becoming entrenched in a
broader inflation rise.
(editing by David Christian-Edwards)
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