Wednesday April 9, 2008 - 20:01:27 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Dollar falls broadly before ECB rate meeting
(Recasts; adds comments, changes byline)
By Vivianne Rodrigues
NEW YORK, April 9 (Reuters) - The dollar fell broadly on
Wednesday as traders snapped up the euro a day ahead of a
European Central Bank policy meeting expected to deliver more
tough inflation talk and signals the ECB is not ready to cut
This would be in sharp contrast to the deteriorating
economic picture in the United States, where minutes of the
Federal Reserve's March policy-meeting released on Tuesday
showed that members believed a prolonged and severe economic
downturn could not be ruled out.
Analysts said the minutes cemented expectations the Fed
would lower its benchmark lending rate by at least 25 basis
points later this month, further boosting the euro's yield
advantage against the dollar.
The dollar also fell sharply against the yen and the Swiss
franc as U.S. stocks declined on worries about the outlook for
corporate profits and as crude prices rose to record highs.
"The combination of dovish Fed minutes and an expected
hawkish stance by the ECB tomorrow is putting pressure on the
dollar," said Camilla Sutton, a currency strategist at Scotia
Capital in Toronto. "The ECB is widely expected to keep rates
unchanged, keeping the yield advantage in favor of the euro."
The euro vaulted to a session peak of $1.5864, just shy of
a record high of $1.5905 hit last month. In late afternoon
trading, the euro EUR was last at $1.5821, up 0.8 percent
from Tuesday and still within the week's trading ranges.
CREDIT WORRIES LINGER
Interest rate futures, which measure market sentiment
toward Fed monetary policy, are pricing in about a 40 percent
chance that fed funds rate would be cut by another half
percentage point at the April 29-30 meeting.
Since mid-September, the Fed has lowered its benchmark
overnight lending rate by 3 percentage points to 2.25 percent,
erasing the dollar's yield advantage over the euro. The ECB has
kept its refinancing rate at 4 percent.
A decline in U.S. stocks and lingering concerns about the
credit markets added to the dollar's woes versus the yen and
the Swiss franc.
The dollar fell to a session low of 101.51 yen <JPY=> and
reversed earlier gains that had taken it near a one-month high.
It was last trading at 101.77 yen, down 0.8 percent on the
Against the Swiss currency, the greenback dropped 1.3
percent to 1.0016 francs <CHF=>.
News that the Fed was considering further steps to address
liquidity reminded investors that the credit crisis was far
from over. For details, see [ID;nN09451835]
"The Fed is floating ideas on how to extend its balance
sheet without printing money," said David Gilmore, partner at
FX Analytics in Essex, Connecticut. "The market rushed to the
notion that the credit crisis is behind us. The idea that we
can price a recovery before we price a recession is ludicrous
and we are going to continue to wake up to runs on the dollar
and weak equity markets."
With the ECB expected to keep rates unchanged after its
policy meeting, the euro hit a record high of 80.12 pence
<EURGBP=> against sterling earlier.
Data showing that UK consumer morale fell to its lowest
level in four years in March and the International Monetary
Fund's reduction in its growth outlook stoked debate on how
aggressively the Bank of England might cut rates after its
policy meeting on Thursday.
(Additional reporting by Lucia Mutikani; Editing by Leslie
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."