Friday June 27, 2008 - 10:42:01 GMT
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Reuters - www.reuters.com
FOREX NEWS-Swissie, yen cash in on rising risk aversion
* Dollar down 0.5 pct at 106.26 yen, 1.0194 Swiss francs
* Record high oil prices, falling stocks fan risk aversion
* Russian reserve diversification comments help Swissie
(Updates prices, changes byline, recasts)
By Toni Vorobyova
LONDON, June 27 (Reuters) - The yen and the Swiss franc
rallied to three-week highs versus the dollar on Friday,
benefiting from a pick-up in risk aversion due to record high
oil prices and slumping stocks.
The Swissie got an extra boost after the Russian central
bank said it will increase the currency's share in its $558.7
billion gold and forex reserves [ID:nL27239347].
The oil price hit a record $141.75 a barrel, bringing its
gains for the first half of the year to over 47 percent CLc1
and reinforcing global inflation concerns.
This benefited the euro thanks to expectations of an
inflation-busting European Central Bank rate hike in contrast to
the Federal Reserve, which disappointed some investors this week
by signalling it is in no hurry to start tightening policy.
"There is a bout of risk reduction across assets. It
started from the Fed u-turn, which put the dollar under
pressure. Oil prices headed up and that's putting more pressure
on equities," said Martin McMahon, FX strategist at Credit
Suisse in Zurich.
"It's probably got further to run and being in the Swiss
franc is a good place to be, and in the yen to a certain extent
The euro slipped to a two-week low of 1.6040 Swiss francs
<EURCHF=> while the dollar hit its lowest since June 9 at 1.0168
The yen added 0.4 percent to reach a three week high of
106.17 per dollar <JPY=> and strengthened versus the euro
The euro rose to a three-week high of $1.5782 before
trimming gains to stand at $1.5767 by 0949 GMT <EUR=>.
The single European currency showed little reaction to euro
zone economic sentiment falling more than expected this month to
a three year low of 94.9.
Analysts reckon the data won't deter the ECB from raising
rates to 4.25 percent next week.
Illustrating the inflation problem, Spanish June consumer
inflation hit a record high of 5.1 percent, inflation rose in
five German states and French producer prices rose 1.3 percent
in May from the previous month, more than double the market
EU Economic and Monetary Affairs Commissioner Joaquin
Almunia said on Friday that euro zone inflation will stay high
for longer than previously expected and oil and food prices may
In the United States, the extent of price pressures will be
seen with the 1230 GMT release of the core personal consumption
expenditure (PCE) data.
The Fed's favourite inflation measures is seen rising 0.4
percent on the month in May, but with growth slowing the U.S.
central bank has less scope for rate hikes than its euro zone
As such an above forecast inflation reading may actually be
negative for the dollar according to ING, which expects annual
core PCE to rise 2.1 percent.
"Any higher would be bad news for asset markets on the view
that the Fed would have to hike regardless of the economic
impact," ING said in a research note.
(Editing by Gerrard Raven)
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