Thursday April 10, 2008 - 10:30:57 GMT
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Reuters - www.reuters.com
FOREX News - Euro scales record highs vs dlr, stg before ECB
(Recasts with euro peaks, changes byline)
By Toni Vorobyova
LONDON, April 10 (Reuters) - The euro hit a record high
versus the dollar on Thursday on expectations that the European
Central Bank will hold interest rates at 4 percent later in the
session and signal it is not ready to cut any time soon.
The euro also scaled historic peaks versus sterling, with
the Bank of England seen cutting rates at 1100 GMT to 5 percent.
The ECB decision is due at 1145 GMT, followed by a news
conference with President Jean-Claude Trichet at 1230 GMT.
The ECB's inflation-focused stance contrasts with that of
the U.S. Federal Reserve, which has slashed rates by 3 percent
since September to 2.25 percent and is expected to move by at
least another quarter point at the end of April.
As well as prospects for further unfavourable moves in yield
differentials, the dollar came under pressure from a sell off in
equity markets fuelled by concerns over the health of the U.S.
"There is still uncertainty regarding (U.S.) economic
activity and the Fed is likely to cut rates by 50 basis points
at the end of the month, and today we have the decoupling of the
monetary policy between the Fed and the BoE on the one hand, and
the ECB on the other hand," said Carole Laulhere, currency
strategist at Societe Generale.
"We are waiting for the ECB to stay unchanged this afternoon
and we hope he (Trichet) will stay quite hawkish. We are long
euro/dollars with a target of $1.61," she added.
The euro rose as high as $1.5912 according to Reuters data,
bringing its gains for 2008 so far to 9 percent <EUR=>.
It has also carved out similarly impressive year-to-date
gains versus sterling, climbing to 80.29 pence <EURGBP=>.
EURO: $1.60 NEXT?
The Norwegian crown strengthened beyond 5 per dollar for the
first time since early 1980s <NOK=>, bolstered by broad dollar
weakness as well as by oil prices, which held near Wednesday's
record highs CLc1.
The inflationary impact of high oil prices also boosted the
case for a hawkish, inflation-fighting message from ECB.
"We can hardly expect anything from Trichet but another
round of jawboning on inflation risks, particularly with oil
spiking to new highs," Saxo Bank said in a research note, adding
that a hawkish news conference could send the euro above $1.60.
The yen benefited from a broad pick up in Asian currencies
after the Monetary Authority of Singapore re-centred the
Singapore dollar's trade-weighted band pushing up the currency
by as much as 1.4 percent. <SGD=>
The move dragged the dollar below the psychologically
important 7.0 Chinese yuan level <CNY=CFXS>, while the yen rose
1.4 percent on the day to 100.35 per dollar <JPY=>.
The euro fell 1 percent to 159.42 yen <EURJPY=>.
A fall in equity markets also helped the low-yielding
Japanese currency as well as the safe-haven Swiss franc <CHF=>.
European shares fell 1.4 percent , as financials
were hurt by news that Lehman Brothers had liquidated three
investment funds hit by "market disruptions" [ID:nL10875061].
Apart from the ECB and BoE rate decisions, investors were
also cautious before a meeting of the Group of Seven economic
powers later this week which will try to tackle the global
(Editing by Ruth Pitchford)
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