Sunday April 13, 2008 - 22:13:27 GMT
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Reuters - www.reuters.com
FOREX News-Dollar climbs in Asia after G7 warning
SYDNEY, April 14 (Reuters) - The dollar was sharply higher
in early Asian trading on Monday after the Group of Seven major
industrialised countries surprised speculators by warning
against excessive fluctuations in currencies.
The euro was trading at $1.5701 <EUR=>, having slid from
$1.5835 late in New York on Friday, while against a basket of
currencies the dollar was up 0.6 percent at 72.274 .DXY.
After meeting on Friday, G7 finance ministers and central
bankers issued a statement saying they were concerned by the
sharp moves in foreign exchange markets in recent weeks. That
was a marked change in their tone and was taken as a warning
that the dollar was falling too fast.
The move was timely for the dollar as it had been under
heavy pressure from concerns that the U.S. economy was sliding
deeper into recession and that interest rates would have to be
cut further to the bone.
In particular, Friday's dismal earnings report from General
Electric (GE.N: Quote, Profile, Research) suggested weakness in the economy was spreading
rapidly and knocked shares .SPZ down 2 percent
"The reaction to the G7 in the market has been measured so
far," said John Kyriakopoulos, a forex strategist at NAB.
He noted the euro had been quoted around $0.15650 early and
had already bounced from there. The dollar had also only made
modest gains on the yen to 101.30 <JPY=>, from 100.73 late in
New York on Friday.
"The G7 have put some two-way risk into the market but
really the chance of concerted intervention still looks
distant," he added. "On the intervention alert scale, we're
probably around 5 or 6 now, up from 3 or 4 previously."
He thought the new wording on currencies sounded like a
compromise between the Europeans, who likely wanted a stronger
warning about the dollar, and the U.S. side which welcomed the
boost to exports that a weaker currency gave.
"Fundamentally, the dollar's still in trouble," argued
Kyriakopoulos. "The U.S. economy is in recession and rates are
being slashed, while the ECB (European Central Bank) doesn't
look like cutting anytime soon."
He noted that a lot of major U.S. companies were reporting
earnings this week and any repeat of GE's disappointment would
likely put the dollar under renewed pressure.
(Reporting by Wayne Cole; Editing by Jonathan Standing)
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