Monday February 18, 2008 - 12:43:33 GMT
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Reuters - www.reuters.com
FOREX NEWS-Profit taking boosts dollar, maybe not for long
(Updates prices, adds quotes, changes byline)
By Toni Vorobyova
LONDON, Feb 18 (Reuters) - The dollar recovered in trade
thinned by a U.S. market holiday on Monday, as investors locked
in profits following the currency's worst weekly performance of
the year so far.
A series of bleak U.S. economic reports last Friday,
including one showing consumer sentiment hitting a 16-year low,
had rekindled worries about a U.S. recession and reinforced
expectations for more hefty interest rate cuts.
"Because the U.S. is closed today, European investors are
taking the opportunity to take some profit after Friday's
(dollar sell-off)," said Carole Laulhere, currency strategist at
Societe Generale in Paris.
But in the medium term, she added, the dollar should remain
on the defensive after Friday's weak data and expectations for
more weak releases this week as well as the likely dovish tone
of the Fed minutes on Wednesday.
"The minutes should confirm that the Fed is OK to cut again
if necessary and we are sure it will deliver another rate cut at
the next (meeting), so we see no big reason to expect a lasting
trend reversal in the dollar," she said.
By 1117 GMT, the dollar was up 0.3 percent against a basket
of major currencies .DXY at 76.322, after falling 0.74 percent
last week in its worst weekly performance since December.
The euro edged down 0.3 percent against the dollar to
$1.4631 <EUR=> but held within reach of a two-week peak of
around $1.4710 set on Friday.
The greenback was 0.4 percent firmer at 108.19 yen <JPY=>.
Against higher-yielding currencies such as the Australian
dollar, the dollar was much weaker.
The Aussie climbed half a percent to a three-month high
above $0.91 <AUD=> thanks to its hefty yield advantage and
expectations that the Reserve Bank of Australia (RBA) will raise
rates from the current 11-year high of 7 percent as early as
FED CONTRAST WITH AUSTRALIA'S RBA
That was in sharp contrast to the Fed's deep cuts in
benchmark rates since September to 3 percent from 5.25 percent,
with investors eyeing another 50 basis point reduction at the
March policy meeting FEDWATCH.
JP Morgan reiterated buying Australian dollar versus the
U.S. currency as one of its top trades among the majors.
"(Aussie) should remain supported despite fluctuations in
the dollar as the RBA remains hawkish and gold prices are
supported," the bank said in a research note.
It added that in contrast to the likely dovish tone in Fed
minutes, RBA's ones -- also due this week -- "should echo the
hawkish sentiment from news in the past week and support AUD".
Elsewhere, sterling fell half a percent against the dollar
to $1.9502 <GBP=> following Sunday's announcement that Britain
had decided to nationalise ailing bank Northern Rock (NRK.L: Quote, Profile, Research),
adding to worries about the health of the UK economy.
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