Thursday April 24, 2008 - 11:03:08 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro knocked by weak Ifo, 3 U.S. cents off peak
(Changes byline, adds quotes, updates prices)
By Toni Vorobyova
LONDON, April 24 (Reuters) - The euro slid further from this
week's record high versus the dollar on Thursday after the
biggest monthly fall in German business sentiment since
September 2001 dented confidence in the euro zone economy.
The headline Ifo business morale index fell to 102.4 in
April, its lowest since January 2006, undershooting expectations
of an easing to 104.3, while the current conditions component
came in at 108.4 compared with a consensus forecast of 111.0.
The Ifo, coupled with a slump in euro zone manufacturing PMI
to near contraction levels on Wednesday, suggested that the euro
zone may not be immune to a U.S.-led economic slowdown.
The data poured cold water on nascent market expectations of
a European Central Bank interest rate hike this year, which had
been born out of continued hawkish rhetoric from
inflation-focussed European Central Bank policymakers.
"One of the reasons that euro has been so strong over the
past couple of months is the fact that German manufacturing
confidence had been very strong, and hadn't really been
vulnerable to the slowdown elsewhere, particularly in the
U.S.... This is probably the first sign we've had that there's
been a weakening," said Adarsh Sinha, currency strategist at
"It came in much weaker than expected and the euro's taken a
hit on the back of that...If anyone was punting on a rate hike
sometime this year from the ECB, the Ifo would have certainly
reduced the chances, but in my view the chances were never that
The euro fell 1 percent to a one-week low of $1.5720 <EUR=>,
nearly three cents below Tuesday's record highs. Technical
analysts said a break below key support at $1.5710 would open
the door for further weakness.
The euro was also down 0.6 percent at 163.16 yen <EURJPY=>,
while the dollar was up 0.2 percent at 103.57 yen <JPY=>.
The dollar was also up 0.7 percent against a basket of six
major currencies at 72.316 .DXY.
UBS analysts said the dollar was garnering support from U.S.
earnings, with 30 out of 41 releases from S&P 500-listed
companies surprising to the upside on Wednesday.
Thursday's crop of U.S. results includes American Express
(AXP.N: Quote, Profile, Research), Coca-Cola (CCE.N: Quote, Profile, Research) and Microsoft (MSFT.O: Quote, Profile, Research).
In Europe, banking worries dominated stock market sentiment
and shares eased in early trade after Credit Suisse reported its
first quarterly loss in five years (CSGN.VX: Quote, Profile, Research) [ID:nL24209539].
The dollar's gains come as investors look closely at whether
or not the Federal Reserve might be ready to pause its
aggressive run of rate cuts after an expected quarter-point trim
next week to 2.0 percent.
"If earnings releases remain constructive, and macroeconomic
data fails to disappoint, this will provide the Fed with room to
assess the impact of its aggressive easing so far," UBS said in
a research note.
The U.S. central bank has slashed 3 percentage points off
borrowing costs since September in a bid to stave off recession.
Further clues on the U.S. rate outlook could come from
durable goods and new homes data due at 1230 and 1400 GMT
Among high yielders, the New Zealand dollar slipped after
the country's central bank kept interest rates at a record-high
8.25 percent as expected, but hinted it may cut borrowing costs
sooner than markets had anticipated [ID:nWEL271172].
The kiwi dipped 0.2 percent to $0.7974 <NZD=>, and hit a
five month low versus the Australian currency <AUDNZD=R>.
(Editing by David Christian-Edwards)
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