Tuesday June 24, 2008 - 10:48:23 GMT
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Reuters - www.reuters.com
FOREX NEWS-Euro hits 11-mth high vs yen, dlr awaits Fed
* Broadly firm euro hits 11-month high vs yen
* Eyes on Fed statement due on Wednesday
* Geopolitical jitters, M&A talk support Swissie
(Changes byline, updates prices, adds quotes)
By Toni Vorobyova
LONDON, June 24 (Reuters) - The euro gained broadly on
Tuesday, hitting an 11-month high versus the yen, as stronger
than expected French data backed expectations of a European
Central Bank interest rate hike next week.
French consumer spending posted its biggest monthly rise in
4-1/2 years in May and French June business morale data also
surprised on the upside. The releases reassured investors about
the health of the euro zone economy following Monday's weak
readings on the euro zone PMIs and on the German Ifo.
Firm expectations of a July ECB rate hike to 4.25 percent
contrast with bets that Japanese policy will remain at an
ultra-low 0.5 percent until at least the end of the year.
In the United States, markets are nervous ahead of a two-day
Federal Reserve meeting starting on Tuesday, which some in the
investors reckon will pave the way for future tightening.
"Yields in almost every other country are higher relative to
Japan...which is why the yen have been performing poorly," said
Adarsh Sinha, currency strategist at Barclays Capital.
"Oil prices are slightly higher and that tends to be
associated with a strong euro against the dollar...(And) data
from France was a bit stronger than expected, so that's helping
the euro as well. But it's quite a small move, and that's to be
expected given the FOMC rate decision tomorrow," he added.
The euro rose as high as 168.26 yen according to Reuters
data, its strongest since July 2007 <EURJPY=>.
By 1007 GMT it was a quarter percent higher versus the
dollar at $1.5563 <EUR=>, having recovered most of the losses
sustained in the wake of Monday's weak euro zone data.
The euro also added 0.3 percent against sterling to 79.23
The dollar fell as much as half a percent to 1.0394 francs
<CHF=>, with the Swissie benefiting from talk of Swiss bank UBS
(UBSN.VX: Quote, Profile, Research, Stock Buzz) being a potential big target for HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) as well
as from geopolitical jitters.
Traders said the safe haven franc was bought on market talk
of a strike on Iran's nuclear sites -- but the rumours were
denied by a senior Iranian nuclear official [ID:nHAF435539].
FED TO DISAPPOINT?
Against a basket of major currencies, the dollar slipped 0.15
percent to 73.322 .DXY.
Although markets are factoring in just a 12 percent chance
of a Fed rate hike on Wednesday FEDWATCH, they expected the
Fed to pave the way for nearly 75 basis points worth of hikes
priced in by year-end.
But some analysts said the U.S. central bank might be less
hawkish than some in the market are expecting.
"We expect this week's FOMC meeting to disappoint the
market's expectation of three U.S. rate hikes before the end of
the year," said UBS analysts in a report.
"In contrast the ECB is likely to raise interest rates next
month so the euro should trade back towards the top of its
$1.53/1.60 range. This will also drag euro/yen up as the Bank of
Japan, like the Fed, is unlikely to raise interest rates."
Their view could be confirmed by weak U.S. data on Tuesday,
with the calendar featuring April S&P/CaseShiller house price
index and June consumer confidence.
(Editing by Gerrard Raven)
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