Tuesday April 1, 2008 - 11:56:11 GMT
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Reuters - www.reuters.com
FOREX NEWS -Euro, Swiss franc dip as bank jitters spread to Europe
(Changes byline, updates prices, adds quotes)
By Simon Falush
LONDON, April 1 (Reuters) - The dollar rose on Tuesday after
Swiss bank UBS (UBSN.VX: Quote, Profile, Research) announced an additional $19 billion of
writedowns and Deutsche Bank said it expects to write down a
larger than forecast $4 billion in the first quarter, showing
that credit problems are not limited to the United States.
The dollar also got a boost from investors selling gold
<XAU=> and crude oil CLc1 and putting their money back into
Turmoil in the U.S. banking sector driven by defaults in
subprime mortgages have led to multi-billion dollar write-downs
by U.S. banks and a lack of confidence in the economy leading
investors to sell the dollar.
But the writedowns in Deutsche and UBS -- which has now
written down a total of $37 billion -- reminded investors that
European economies also remain vulnerable to the financial
crisis, said analysts.
"The dollar got support from credit concerns, with the UBS
writedown indicating that problems may spread beyond a few
banks," said David Pais, currency strategist at Citi.
By 1120 GMT the dollar was up 1.2 percent at 1.0054 francs
<CHF=>. The euro was down 0.8 percent on the day at
$1.5646 <EUR=>, after rising as high as $1.5895 on Monday
according to Reuters data.
The dollar also gained 0.6 percent against the yen breaking
through the psychological 100 barrier <JPY=>.
The Bank of Spain said the fall in the value of the U.S.
dollar against the euro and yen was "very pronounced" in early
March adding to recent comments from European policymakers about
the euro's rapid ascent.
The euro and Swiss franc also faced headwinds from soft data
showing slow German retail sales, and falls in French, Italian,
Spanish and Swiss manufacturing PMIs.
ISM IN FOCUS
The dollar registered its biggest quarterly loss versus the
euro in four years on Monday. This followed data showing a sharp
gain in euro zone inflation which suggested a continued
divergence in monetary policy between the rate-slashing Federal
Reserve and the hawkish European Central Bank.
Analysts said more dollar weakness could follow soon,
particularly if the U.S. Institute for Supply Management's
manufacturing index disappoints at 1400 GMT. The consensus is
for it to contract further to 47.5 -- its lowest in nearly five
However the falling gold price may mean that the euro will
fail to get a boost from a weak ISM number, analysts said.
"The fall in gold overnight has been matched one-for-one by
the single currency's retreat and if investors' concerns now
truly lie with growth, then a negative outcome from today's ISM
report on U.S. manufacturing would by no means automatically
underpin a reversal in the euro's current fortunes," Bank of New
York Mellon said in a research note.
The Australian dollar fell broadly after the country's
central bank kept interest rates at a 12-year high of 7.25
percent, as widely expected, but issued a statement that reduced
expectations of a further rate rise.
(For details please double click on [ID:nSYD17079])
The Aussie was down 0.35 percent at US$0.9095 <AUD=>.
(Editing by Ian Jones)
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