Monday February 11, 2008 - 12:10:45 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro steadier as rate cut hopes ease, yen up
(Changes byline, adds comments)
By Ian Chua
LONDON, Feb 11 (Reuters) - The euro steadied on Monday from
its biggest weekly slide in 1-1/2 years versus the dollar,
benefiting from hawkish policymaker comments, while the yen rose
broadly as investors cut back on risky trades.
European Central Bank President Jean-Claude Trichet stressed
on Saturday that there was no call to move rates up or down at
last week's policy meeting, while Governing Council member Axel
Weber told a German newspaper the ECB had not relaxed its view
on inflation risks. [ID:nT81373] and [ID:nL11686641]
"The market is interpreting that as no rate cuts being on
the agenda for the time being and euro is a bit firmer because
of that," said David Pais, currency strategist at Citigroup.
Another positive for the euro came from comments by OPEC
Secretary General Abdullah al-Badri over the weekend that OPEC
may switch to pricing oil in euros rather than dollars.
By 1130 GMT, the euro was up 0.3 percent against the dollar
at $1.4560 <EUR=> on the day, steadier after last week's
2-percent slide -- the biggest weekly decline in 1-1/2 years.
The euro had been hit last week by growing expectations that
the ECB was opening the door for future monetary easing after
the central bank's policy statement dropped wording about
pre-emptive action against inflation while warning of downside
Still, money markets are pricing in nearly 100 basis points
of ECB easing by year-end FEIZ8.
Against the yen, the euro slipped 0.2 percent to 155.46 yen
<EURJPY=>, while the dollar fell 0.6 percent to 106.77 yen
The Japanese currency was supported by a risk averse mood as
worries about global growth, highlighted at the weekend's G7
meeting, and falling equity markets encouraged investors to exit
risky bets funded by cheap borrowing in the yen.
G7 finance leaders said the crumbling U.S. housing market
had wounded the world economy and conditions may worsen as
debt-laden banks clamp down on credit. [ID:nT262281]
But the language on currencies was largely a repeat of the
previous statement, with the G7 saying exchange rates should
reflect economic fundamentals. They tweaked comments on China's
yuan to say "we encourage" the need for greater appreciation of
the currency, instead of "we stress".
HAWKISH RBA, UK INFLATION
Among some of the best performing major currencies was the
Australian dollar, which hit one-week highs versus the dollar
after the country's central bank warned it would likely need to
raise interest rates again to restrain quickening inflation.
The Aussie dollar <AUD=> rose nearly 1 percent to $0.9051 as
investors bet the next rate rise will occur as soon as the March
central bank meeting. Just last week, the Reserve Bank of
Australia (RBA) lifted rates to an 11-year peak of 7 percent.
Also at uncomfortable levels was British factory gate
inflation, which rose in January to its highest rate in more
than 16 years, while input price inflation hit a record high.
Sterling reversed early losses to be up 0.2 percent at
$1.9501 <GBP=> in the wake of the data as investors pared rate
cut expectations from the Bank of England.
"For a market which is aggressively priced for future
easing, this will make for uncomfortable reading and rate cut
expectations will need to be pared back," said Daragh Maher,
senior FX strategist at Calyon, in a report.
Maher said sterling might have performed even better if not
for a separate report showing Britain's trade deficit with the
rest of the world was worse than expected in December at 7.574
(Editing by Mike Peacock)
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