Thursday April 3, 2008 - 11:57:10 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar climbs, euro slides on weak sales data
(Changes byline, updates prices, adds quotes)
By Naomi Tajitsu
LONDON, April 3 (Reuters) - The dollar rose broadly on
Thursday, hitting a three-week high against the yen, as a recent
run of firmer than expected U.S. data suggested interest rates
may not need to be slashed as much as previously thought.
Dollar gains versus the euro accelerated after euro zone
retail sales unexpectedly fell 0.5 percent on the month in
February, suggesting that signs of weakening economic growth may
be eating into consumer spending in the bloc. [ID:nL03186217]
Analysts said dollar sentiment has been recovering since a
massive writedown by Swiss bank UBS raised hopes its bad news
was out in the open and U.S. investment bank Lehman Brothers
successfully raised $4 billion to shore up its finances.
"There's a little bit of a feelgood factor returning to the
market," said David Pais, currency strategist at Citigroup,
while adding that the dollar's recovery was largely due to an
adjustment in overstretched short positions in the currency.
Many in the market are waiting for U.S. jobs-related data
later in the day and on Friday, after Wednesday's ADP national
employment report showed the private sector added 8,000 jobs
against forecasts for a 48,000 loss.
By 1120 GMT, the euro had tumbled 0.9 percent to $1.5540
<EUR=>, moving further away from record peaks above $1.59
touched last month.
The dollar was up 0.5 percent at 102.75 yen <JPY=>, and more
than a full percent at 1.0190 Swiss francs <CHF=>.
Sterling fell 0.3 percent to $1.9820 <GBP=>, struggling
after data showed the UK service sector slowed more than
expected, adding to pressure on the Bank of England to cut
interest rates even as inflation creeps higher. [ID:nL03090346]
A SMALLER FED CUT?
Investors pushed the dollar higher across the board as the
market has begun to rule out a big Federal Reserve rate cut this
month despite comments from Fed Chairman Ben Bernanke that the
United States may fall into recession in the first half of the
Markets are now pricing in just a 10 percent chance of a
half percentage point U.S. rate cut this month -- down from as
much as 62 percent last Friday FEDWATCH.
The dollar also continued to be bought by investors
liquidating positions in oil, gold and other commodities.
"Bernanke was not exactly upbeat on the economy at all ...
(but) he did not really offer anything more pessimistic than the
market expected," said Geoffrey Yu, currency strategist at UBS
"The deterioration in the data has eased a bit, it's still
falling, but it's not collapsing ... And the commodities sell
off has (also) had quite an impact on dollar strength as funds
have liquidated their holdings."
Traders are now eyeing the U.S. Institute for Supply
Management's non-manufacturing index at 1400 GMT. Its employment
component, together with the weekly jobless claims at 1230 GMT
will provide the last steer on the likely outcome of Friday's
key non-farm payrolls report.
It is expected to show the economy shed jobs in March for a
third straight month, but some analysts see scope for an upside
surprise after the ADP report.
The Fed has cut its benchmark interest rate since September
by three full points to 2.25 percent, while the European Central
Bank has held rates firm at 4 percent to fend off euro zone
inflation, which hit a record high in March.
ECB Governing Council member Klaus Liebscher kept up the
bank's anti-inflation rhetoric, saying earlier on Thursday that
euro zone inflation was worryingly high and was likely to remain
elevated for the foreseeable future.
Dutch central bank Governor Nout Wellink, who sits on the
ECB's governing board, seconded that view on Thursday, saying
that record high inflation was a serious concerns and risks
sparking a wage-price spiral despite looming risks to growth.
(Editing by Mike Peacock)
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