Monday April 21, 2008 - 21:00:55 GMT
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Reuters - www.reuters.com
FOREX NEWS-US dollar down on Bank of America results; euro up
(Updates prices, adds quotes)
NEW YORK, April 21 (Reuters) - The U.S. dollar slipped on
Monday after unexpectedly weak profits from Bank of America
dampened investors' optimism that U.S. financial companies may
escape the pinch of the crisis in global credit markets.
In Europe, hawkish European Central Bank inflation comments
supported the euro after ECB Governing Council member Klaus
Liebscher said there was no reason for pessimism on euro zone
growth, suggesting the ECB will maintain interest rates at a
six-year high. For details, see [ID:nL21705942]
Bank of America Corp (BAC.N: Quote, Profile, Research), the No. 2 U.S. bank, reported
a fall in first-quarter profit due to write-downs and rising
credit losses. Net income fell to $1.21 billion, or 23 cents
per share. [ID:nN21410537]
Analysts said Bank of America's results suggest the fallout
from the credit crisis may not be over as some have speculated,
chilling the appetite for risk as such problems were expected
to continue weighing on the U.S. economy and the dollar.
"The dollar started Monday on a weak note, while the euro
got a lift from ECB hawkish comments," said Matthew Strauss, a
currency strategist at RBC Capital Markets in Toronto. "Bank of
America's results obviously don't help the dollar and we also
have the ECB making comments suggesting rates may remain
In late trading in New York, the euro was 0.7 percent
higher at $1.5926 <EUR=>. The euro zone single currency rose to
a record $1.5983 on April 17, its highest since its inception
in 1999, according to Reuters data.
The euro rose for the first time in three days amid a
growing view that the ECB is in no hurry to cut interest rates
from 4.0 percent for now due to nagging inflation risks.
Strauss said traders may attempt to push the euro through
$1.60 this week.
"That level has become almost magical," he added. "But
before the euro breaks through it, it will find a lot of
resistance and stop barriers on the way."
The U.S. currency also came under selling pressure as
investors continued to fret about the inflationary effect of
oil prices, which hit a record high of $117.60 a barrel.
The greenback slipped 0.4 percent to 103.21 yen <JPY=> and
it fell more than 0.4 percent against a basket of six major
currencies to 71.647 .DXY in Monday trade.
Results on Friday from Citigroup (C.N: Quote, Profile, Research), the largest U.S.
bank, showed less damage from the credit market crisis than
some had expected, with write-downs of $6 billion contrasting
with market rumors of write-downs approaching $22 billion.
This had sparked dollar buying late last week as some
speculated that the worst of the credit crunch may have
But having seen several "false dawns" in the credit crisis,
investors were reluctant to place too much faith in the banking
results as marking the beginning of the end for the squeeze.
The U.S. Federal reserve has cut its main interest rate
three percentage points since September to prevent the economy
from sliding into recession.
Sterling also fell, with markets unimpressed by a Bank of
England offer to swap government bonds worth 50 billion pounds
for banks' riskier mortgage debt to help them navigate the
credit squeeze as the amount was known before the
Despite a tentative pickup in risk appetite from last
week's banking results and Royal Bank of Scotland (RBS.L: Quote, Profile, Research),
Britain's second-biggest bank, confirming it is considering a
rights issue, UK markets had been on tenterhooks over the BoE
plan to help ease strains in British mortgage markets.
The pound extended losses in reaction to the news, pushing
the euro up 1.5 percent to 80.37 pence <EURGBP=>, not far from
a record high near 81 pence hit last week. The UK currency fell
0.8 percent to $1.9813 <GBP=>.
(Reporting by Nick Olivari and Vivianne Rodrigues)
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