Friday April 18, 2008 - 12:17:31 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Dollar boosted by Citi earnings, euro retreats
By Naomi Tajitsu
LONDON, April 18 (Reuters) - The dollar hit a one-month high
against the yen and pulled further away from a record low versus
the euro on Friday after Citigroup surprised investors with
earnings that were not as bleak as many had been expecting.
This extended the euro's earlier slide, helping push the
single currency down more than a full cent against the dollar
and well away from a record high near $1.60.
Citigroup Inc (C.N: Quote, Profile, Research), the largest U.S. bank, posted a
quarterly loss of $5.1 billion, adding to losses in the previous
quarter, and pre-tax write-downs of $6.0 billion [ID:nWNAS8367].
The figures showed financial institutions are continuing to
suffer from the credit crunch, but Citi's writedowns were below
some market expectations of up to $22 billion.
"Generally speaking, we are now seeing results coming in
broadly in line with ... downward revisions and in some cases
there have been some positive surprises," said Ian Stannard,
senior foreign exchange strategist at BNP Paribas.
Citi's announcement drove the dollar 0.8 percent higher to
103.40 yen <JPY=>, its strongest level since mid-March. The
dollar index was trading at 71.814 .DXY.
The euro fell more than a full cent against the dollar to
trade more than 0.3 percent down on the day at $1.5840 by 1200
GMT, well away from a record peak of $1.5983 hit earlier in the
week according to Reuters data.
The euro was also stung by a sharp climb in sterling on
expectations of an imminent UK plan to aid the struggling
Hope that the plan may limit the extent of UK interest rate
cuts pushed euro/sterling down more than 0.7 percent to 79.21
pence <EURGBP=>, away from this week's record high at 80.98
pence. Sterling also rose 0.4 percent to $1.9993 <GBP=>, a
The euro has jumped nearly 9 percent to the dollar so far
this year on the view that European interest rates will stay put
until later this year, while the U.S. Federal Reserve is seen as
cutting rates further from the current 2.25 percent.
This would help to keep euro zone rates significantly higher
than U.S. ones, keeping the euro's yield appeal intact.
Still, given the euro's ferocious gains in the past few
months -- the euro sailed through $1.50 only two months ago --
analysts said the market was taking a breather ahead of $1.60.
"The move from $1.50 to $1.59 has been almost unrelenting so
a consolidation is warranted in the short term," said Stephen
Koukoulas, global strategist at TD Securities.
But he added that a push through $1.60 was only a matter of
time, a view shared by many in the market.
Market participants said that euro selling would likely be
short-lived, as ongoing inflation pressures will prompt the ECB
to hold rates at 4 percent at least through autumn.
The inflation argument was bolstered by figures showing
German producer prices in March increased 0.7 percent
month-on-month and 4.2 percent for the year, above expectations.
Earlier this week, euro zone inflation hit a record high.
"The main driver is interest rate differentials and it looks
as though the ECB won't cut in the first half of the year," said
Kikuko Takeda, senior currency economist at BTM-UFJ.
Analysts said that while U.S. bank earnings this quarter
have not been as dreary as some had been expecting, figures
showed that the credit crisis is far from over, which many
believed would keep the U.S. currency under selling pressure.
Merrill Lynch & Co (MER.N: Quote, Profile, Research) this week posted its third
straight quarterly loss and said it planned to cut 2,900 more
jobs after recording more than $6.5 billion in additional
writedowns on subprime mortgages and other risky assets.
Problems in the U.S. financial sector have been triggered by
weakness in the housing market and some analysts see further
falls to come.
"Put simply, not all the bad news to come from the U.S.
housing market is priced in and nor can it be, suggesting
further rises in delinquencies, price falls in mortgage-backed
CDOs and possibly additional writedowns," said ING in a note to
(Additional reporting by Veronica Brown and Simon Falush;
Editing by Ruth Pitchford)
journalists are subject to the Reuters Editorial Handbook which
requires fair presentation and disclosure of relevant interest
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."