Thursday January 17, 2008 - 12:04:34 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro bounces off lows, eyes on Bernanke
By Ian Chua
LONDON, Jan 17 (Reuters) - The euro rebounded from two-week
lows against the dollar on Thursday after comments from ECB
Governing Council member Yves Mersch suggested the central bank
was not looking to lower interest rates yet.
Mersch reiterated that the European Central Bank discussed
two options, not three, at last Thursday's policy meeting. A day
earlier he said he did not rule out a downward revision of euro
zone growth forecasts for 2008, comments that sent the euro
"He is saying that the discussion in January was still
should they raise rates or keep them same... It's a slight
change from yesterday when he was discussing the (possibility)
of downward revisions to growth this year," said Tom Vosa, head
of market economics at nabCapital.
"It's obvious that he wants to remind the market that the
ECB is still very much looking at tightening policy should they
see second round effects feed through to wage pressure. So it
puts us back to where were on Tuesday."
The euro bounced to a high of $1.4686 <EUR=>, well off an
intra-day two-week low of $1.4589, before steadying at around
$1.4640, little changed on the day. It slid more than 1 percent
Against the Swiss franc, the dollar hit a one-week high of
1.1087 <CHF=>, bouncing up from Wednesday's record low of
1.0836, but it gave up early gains versus the Japanese currency,
slipping 0.3 percent to 107.15 yen <JPY=>.
The market was also waiting for Federal Reserve Chairman Ben
Bernanke's testimony before the House Budget Committee due at
1500 GMT to validate the risk of chunky U.S. rate cuts already
"With the market fully pricing in a 50 basis point cut and
given the reasonable possibility that it could be 75 ... it
would take something pretty dramatic to suggest even more
aggressive cuts," Simon Derrick, head of currency research, at
Bank of New York Mellon.
As well as Bernanke and U.S. data, a speech by ECB President
Jean-Claude Trichet and any developments in Washington over a
possible stimulus package for the struggling economy that
President George W. Bush has said he is considering, will also
be closely watched.
The White house said Bush will hold a conference call with
congressional leaders on Thursday to discuss the economy.
Analysts said that discussion of the stimulus package may
also feature during Bernanke's speech as it is a testimony
before the House Budget Committee.
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