Friday September 5, 2008 - 11:42:33 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr at 11-mth high vs euro; spotlight on US jobs
(changes byline, adds quotes, updates prices)
* Euro hits 11-month lows as dollar revival gathers pace
* Dollar index rises to 79.06 .DXY
* Economists expect 75,000 U.S. jobs were shed in August
* Yen benefits from global carry, leverage unwind
By Veronica Brown
LONDON, Sept 5 (Reuters) - The dollar surged to an 11-month
high versus a weak euro on Friday, with traders continuing to
buy the greenback ahead of the August U.S. employment report,
while a flight from riskier carry trades lifted the yen.
Economic headwinds continued to shake broad market sentiment
as escalating worries about global growth spooked investors,
leading to a 3 percent slide on Wall Street on Thursday. A
sell-off followed in Asia and European trading.
Market players said investors were exiting leveraged carry
trades, or positions funded by borrowing yen at low rates to buy
higher yielding currencies and commodities.
This trading pattern has until recently boosted the dollar
too, as U.S. investors liquidate holdings of foreign assets and
repatriate the funds back home.
Two reports Thursday on the U.S. labour market reignited
fears that tightening credit conditions will herald another wave
of economic weakness, turning all eyes towards the U.S. non-farm
payrolls report at 1230 GMT.
Economists polled by Reuters expect that 75,000 jobs were
shed in August, but a figure meeting those expectations, or even
a slightly bigger fall, was not seen blowing the dollar's
resurgence off course.
"You would need to see some significant triple digit number
to really derail optimism that the U.S. is going to skirt the
worst of the global downturn and accentuate the risk that the
economy is in greater trouble," Rabobank strategist Jeremy
At 1108 GMT, the euro <EUR=> was down 0.1 percent at
$1.4235, having traded at its lowest since October 2007 at
The dollar index .DXY was at 78.89, having traded at a
year-high of 79.066 earlier on Friday.
Sterling <GBP=> was steady at a tad higher at $1.7611, while
the dollar <JPY=> was down 0.1 percent at 106.25 yen.
On Thursday the European Central Bank left interest rates on
hold at 4.25 percent, as did the Bank of England at 5 percent.
The yen rallied broadly, hitting two-year highs against the
Australian and New Zealand dollars, and a near five-year high
Traders cited talk of more hedge funds going under after
news that Ospraie Management LLC, the world's biggest
commodities hedge fund, was forced to close its flagship fund
Bill Gross, chief investment officer at PIMCO, the world's
largest bond fund, said on Thursday that the U.S. government
should give the Treasury the authority to buy debt and other
assets to halt a "financial tsunami". [ID:nN04303765]
The focus on Friday will be split between financial and
economic issues. While economists expect a fall in U.S.
employment in August, the unemployment rate is set to hold
steady at 5.7 percent.
Whatever the numbers, currency market conditions remain
volatile and sharp swings can't be discounted.
"The dollar's resilience in the face of the plunge in U.S.
share prices and continued paring back of rate hike expectations
is noteworthy," Brown Brothers Harriman strategists said in a
Meanwhile, the dollar's sharp rally -- it's risen some 10
percent against a basket of currencies in the past month or so
-- has prompted some central banks to sell dollars in order to
prevent their own currencies from weakening too much.
South Korea's central bank reportedly intervened selling
dollars again on Friday, up to $3 billion, some London traders
estimated. The Bank of Korea's dollar selling intervention so
far this year now exceeds $30 billion. See [ID:nSEO130769].
Russia's central bank stepped into the market on Thursday
and sold an estimated $4 billion to steady the rouble, which
sank to its lowest since February 2007. See [ID:nL4107355].
(Additional reporting by Jamie McGeever in London)
(Reporting by Veronica Brown; Editing by Victoria Main)
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