Thursday February 14, 2008 - 12:03:36 GMT
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Reuters - www.reuters.com
FOREX NEWS-Improved risk appetite boosts euro to 1-week highs
(Updates prices, adds comments, changes byline)
By Toni Vorobyova
LONDON, Feb 14 (Reuters) - The euro rose to a one-week high
against the dollar on Thursday, and the yen was generally weaker
as risk appetite improved following upbeat Asian and U.S.
economic data which helped to push up stocks.
Better-than-expected U.S. retail sales data on Wednesday
followed by a solid Australian employment report and Japanese
economic growth data had helped to soothe worries about the
health of the global economy.
Japanese stocks surged 4.3 percent [.T], their biggest
one-day percentage gain in six years, European equities also
rose [.EU] and futures pointed to a higher start on Wall Street
"There was a bounce in stock markets yesterday in the U.S.,
and Asia performed particularly strongly today, so it's another
risk appetite story and ... that's really helped the euro," said
Geoffrey Yu, currency strategist at UBS in Zurich.
"We are seeing some gains in euro/yen, and that's a perfect
indicator that there is some return of interest in the carry
trade and that's definitely helping the high-yielders."
The Japanese currency usually benefits from a risk-averse
mood as currency investors tend to exit risky carry trade bets
funded by cheap borrowing in the yen, but falls when risk
At 1127 GMT, the euro was up 0.3 percent against the dollar
at $1.4619 <EUR=> -- around one-week highs. The common currency
was also 0.3 percent higher at 158.30 yen <EURJPY=>.
Data from the euro zone showed growth slowing slightly less
than expected to a quarterly 0.4 percent in the final three
months of last year.
"(This) is probably in line with ECB expectations and fits
the view that the euro zone will fall only modestly short of its
0.5 percent quarter-on-quarter trend rate this year," Bank of
America said in a research note. "The GDP report thus adds to
the arguments against an early rate cut."
A week ago markets were pricing in as much as 3-1/2 euro
zone rate cuts this year FEIZ8. This followed data showing
service sector growth slowed to a near-standstill and comments
from ECB President Jean-Claude Trichet in which he toned down
his hawkish rhetoric to give as much attention to slowing growth
as to upward price pressures.
However, ECB rhetoric since then has been measured,
suggesting that while policymakers are not considering rate
rises they are in no hurry to move towards easing either, and
markets have now toned down their pricing to just three cuts.
EYEING FED CUTS, RBA HIKES
Investors were also awaiting fresh comments from U.S.
Federal Reserve Chairman Ben Bernanke, who is due to testify on
the state of the U.S. economy and financial markets before the
Senate Banking Committee at 1500 GMT.
The Fed has slashed rates to 3.0 percent from 5.25 percent
in the last five months in its attempt to stave off a deeper
The dollar hit a one-month high of 108.43 yen <JPY=>.
Among the best major performers, the Aussie dollar <AUD=>
climbed nearly 1 percent to $0.9040, boosted by a surprise fall
in the jobless rate to a 33-year low of 4.1 percent in January.
The data bolstered views that the tight labour market in
Australia was stoking inflation and cemented the case for more
interest rates increases. [ID:nSYD220639]
In Japan, investors cheered data showing the world's second
biggest economy grew at double the expected rate in the last
quarter of 2007.
Analysts though still see the Bank of Japan keeping rates on
hold in 2008, or even cutting them, due to the threat of a
(editing by David Stamp)
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