Friday July 18, 2008 - 11:41:47 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Dollar boosted by Citi results, but fears linger
* Dlr rises as Citi reports smaller-than-expected loss
* U.S. currency also benefits from sterling's losses
* Broad dlr sentiment still clouded by financial system woes
* Euro capped as Trichet notes risks to growth
(recasts, changes byline, adds quotes, updates prices)
By Veronica Brown
LONDON, July 18 (Reuters) - The dollar rose versus a basket
of six major currencies on Friday, boosted after Citigroup (C.N: Quote, Profile, Research, Stock Buzz)
reported a smaller-than-expected second quarter loss, calming
some jitters on U.S. financial sector health.
Citi, the biggest U.S. bank, reported a second-quarter loss
per share of $0.49, smaller than forecasts of around $0.61-67.
It took credit costs of $7.2 billion, lighter than some
estimates of around $9 billion.
As well as injecting fresh impetus into the dollar, the
results saw stock markets move into positive territory and
European government bonds hit session lows, with financial
sector sentiment soothed slightly by some forecast-beating
earnings this week.
"As far as the tone in the equity market is concerned,
results in the financial sector were not as bad as expected
which has provided the dollar with some support," said Ian
Stannard, senior currency strategist at BNP Paribas.
The dollar also benefited from sharp falls in sterling after
the Financial Times reported the UK Treasury is working on plans
to change its fiscal rules.
This could effectively give it more leeway to increase
borrowing as a way of mitigating the effects of anticipated
economic slowdown. See [ID:nL17632891].
By 1112 GMT, the dollar index, which tracks its performance
against a basket of six major currencies, was up 0.2 percent at
72.184 .DXY, but still within sight, however, of the record
low of 70.698 hit in March after the Federal Reserve coordinated
JP Morgan Chase's takeover of Bear Stearns.
Sterling was down 0.3 percent at $1.9949 <GBP=>, even though
the UK Treasury dismissed the FT report as "pure speculation."
The euro fell 0.1 percent to $1.5838 <EUR=>, and the dollar
was up 0.3 percent against the yen at 106.63 yen <JPY=>.
U.S. stock futures were called to open higher
SPc1NDc1DJc1, while European stocks rallied to trade up
0.4 percent on the day .
SENTIMENT STILL HAUNTED
Equity market sentiment, and by extension dollar sentiment,
had been dented overnight as disappointing after-the-bell
earnings from tech giants Google (GOOG.O: Quote, Profile, Research, Stock Buzz) and Microsoft (MSFT.O: Quote, Profile, Research, Stock Buzz)
painted a gloomy picture of the U.S. economy.
The Wall Street Journal also reported on Friday that
battered U.S. mortgage giant Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) is considering
raising capital by selling as much as $10 billion in new shares.
Despite the boost from some corporate earnings, dollar
sentiment was still looking quite shaky, given concern over the
U.S. financial system and bleak growth prospects due to the
slumping housing market.
Data on Thursday showing a contraction in July factory
activity in the U.S. Mid-Atlantic region was the latest evidence
of the economic problems there.
"The situation for the dollar near-term is still quite
negative. The macro-economic implications of the financial
market turmoil to date have not really been borne out of the
U.S. data, because of the huge fiscal stimulus plan that has
kept the economy from sinking," said Derek Halpenny, senior
currency economist at BTM-UFJ in London.
"That's going to fade now and over the next couple of months
we will see that come through in the data. That will keep the
market in a fragile state, and that suggests there is still more
potential for the dollar to slide again," he added.
Another focus for currency traders, meanwhile, is the oil
price, which until this week had maintained a close inverse
correlation with the dollar.
Oil has slid more than $10 in the last three days to a
six-week low on Thursday, but recovered slightly to sit above
$130 a barrel on Friday.
The euro, meanwhile, was capped by European Central Bank
President Jean-Claude Trichet's comments published on Friday
that euro zone growth is likely to be weak in the second and
third quarter before staging a recovery.
Risks to growth were on the downside, Trichet said in a
joint interview with four European newspapers. [ID:nL18138509]
(Additional reporting by Alastair Sharp in London)
(Reporting by Veronica Brown; Editing by Victoria Main)
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."