Friday August 8, 2008 - 09:52:19 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar gains broadly as growth worries spread
(Changes dateline, byline, adds quotes, updates prices)
* Euro falls to five-month low vs dollar at $1.5141
* ECB cools interest rate rise prospects
* Pound hits 17-month low, kiwi plunges 2 percent
By Simon Falush
LONDON, Aug 8 (Reuters) - The dollar rallied on Friday,
hitting a five-month high against the euro as the European
Central Bank's caution on its growth outlook shifted the focus
of economic concerns from the United States to the rest of the
Broad dollar strength pushed the currency's index to its
highest in more than five months after traders took a warning
from ECB President Jean-Claude Trichet about slowing growth as a
sign that interest rate increases may be off the agenda for now.
The ECB left rates unchanged at 4.25 percent as expected on
"Most of the fall in euro/dollar came from the extremely
dovish comments from Trichet, in combination with gloomy data
from the euro zone ... but growth is definitely a problem
everywhere," said John Hydeskov, senior FX analyst at Danske
By 0827 GMT the euro had fallen as much as around 1 percent
to $1.5141 <EUR=>, down nearly 10 cents from its high hit last
month above $1.60.
It fell below major technical support to below its 200-day
moving average at $1.5225. It hasn't closed below this technical
level since March 2006.
The dollar rose 1 percent against a basket of currencies to
75.283 .DXY, its strongest since late February, while sterling
slid 0.8 percent to a 17-month low of $1.9257 <GBP=>.
The dollar gained 0.4 percent against the yen to 109.95 yen,
its highest since January <JPY=>.
The euro fell against the yen, dropping 0.6 percent to
166.62 yen <EURJPY=R>.
HIGH YIELDERS SLIDE
Concerns about global growth has helped to push oil prices
down from a peak of $147 last month to around $119 now CLc1
while gold fell to an eight-week trough on Friday, down 15
percent since its peak in March <XAU=>.
The slide in high-yielding currencies deepened as risk
aversion increased and with commodity prices under pressure. The
New Zealand dollar fell 2 percent to as low as $0.6985 <NZD=>
while the Australian dollar fell 1.5 percent to $0.8936 <AUD=>,
a six-month low.
These high-yielding currencies have benefited from strong
commodity prices and strong economic growth which supported high
interest rates, but concerns about the growth outlook has led
investors to expect significant monetary easing.
"The increase in commodity prices seems to be over and
monetary policy will be adjusted to reflect the current economic
environment which isn't as favourable as it has been," said
While the euro has taken a hefty knock after Trichet's
comments, some analysts think the underlying inflationary
problems will limit its downside.
"We suspect that the hawks on the (ECB) Governing Council
will not be too happy with the market's dovish take on the
decision," said Calyon in a note to clients. "(We) will not be
surprised if some of their big hitters are on the wires over the
coming week reminding us all that inflation is too high and
perhaps limiting some of the downside EUR move."
(Reporting by Simon Falush, Editing by David Stamp)
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