Tuesday July 15, 2008 - 10:54:43 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Euro vaults to record high vs dollar
* Euro hits record high at $1.6038
* Weak German ZEW overshadowed by negative sentiment on U.S.
* Market closely watching Bernanke testimony
(Recasts with euro record high, changes byline)
By Toni Vorobyova
LONDON, July 15 (Reuters) - The euro vaulted to a record
high versus the dollar on Tuesday as concern about the health of
the U.S. financial sector overshadowed a series-low reading of
German investor sentiment.
The dollar's slump came just two days after the U.S.
government had tried to reinstate market confidence with a
rescue package for mortgage agencies Freddie Mac and Fannie Mae.
Although the measures were originally seen as a positive,
investors quickly refocused on their potential cost and on the
fact that the very offer of the rescue package signalled that
things in the sector had got pretty bad.
In such an environment, the euro's rally was only very
briefly dented by a bigger than forecast slump in the German ZEW
investor expectations index to a series low of -63.9 in July.
Within 20 minutes of the dour release the euro had regained
its poise to surge above April's record high versus the dollar.
"What outweighs the (ZEW) at the moment is concerns about
how the U.S. economy will do in the second half of the year, and
general lack of confidence in the dollar and the U.S. financial
sector," said Antje Praefcke, currency strategist at Commerzbank
Corporates & Markets in Frankfurt.
"Overall the dollar should remain weak."
The euro rose as high as $1.6038 according to Reuters data
<EUR=>, before trimming gains to $1.5994 by 0937 GMT.
The greenback fell 0.7 percent against a basket of six major
currencies to a 3-month low of 71.320 .DXY.
Tumbling stock markets in Asia and Europe also sent
investors towards the safe-haven Japanese yen. The dollar fell 1
percent to 105.03 yen <JPY=>, while the euro eased 0.5 percent
to 168.00 <EURJPY=>.
BERNANKE'S FINE LINE
Next, focus turns to U.S. retail sales and producer prices
data at 1230 GMT followed by Fed Chairman Ben Bernanke's
testimony before Congress at 1400 GMT.
The dollar's record low versus the euro will pose an
additional headache for the central bank chief who is trying to
balance inflationary pressures -- exacerbated by a weak currency
-- with a slowing economy.
"Bernanke will try to walk the fine line between the need
for price stability ... versus aid for financial markets. While
he may try to opt for a hawkish line today, we would sell into
any USD strength, betting that the Fed will not hike rates
before the election," ING said in a note to clients.
Elsewhere, the Australian dollar hit a 25-year high against
the U.S. dollar of $0.9811 <AUD=> after minutes of the Reserve
Bank of Australia's July meeting showed the central bank
remained concerned about inflation, suggesting it will likely
keep rates at a 12-year high and may even hike again.
The U.S. currency also fell below parity to the Canadian
dollar for the first time in 1-1/2 months <CAD=> ahead of a Bank
of Canada rate decision at 1300 GMT. Policy is widely seen on
hold at 3 percent, but some analysts expect a hawkish statement.
(Reporting by Toni Vorobyova; Editing by Malcolm Whittaker)
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."