Wednesday September 10, 2008 - 22:02:08 GMT
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Reuters - www.reuters.com
FOREX NEWS-US dollar index climbs to 12 month high
* U.S. dollar index touches fresh one-year high
* Euro drops to nearly 12-month low versus dollar
* Dollar recovery theme continues to dominate
* Forex market ignores Lehman results
(Updates prices, adds comment, changes byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, Sept 10 (Reuters) - The U.S. dollar climbed to a
fresh one-year high against major currencies on Wednesday and
surged to nearly 12-month highs versus the euro, as falling oil
prices and a bounce in U.S. stocks overcame worries about the
health of financial firms.
The dollar largely shrugged off news that Lehman Brothers
(LEH.N: Quote, Profile, Research, Stock Buzz), the fourth-largest U.S. investment bank, incurred a
third-quarter loss and failed to announce firm deals to raise
With several banks saying in the last two days that they
are still doing business with Lehman, analysts said problems at
the troubled institution should not exacerbate the global
The dollar is also benefitting from the belief that the
U.S. economy may be more resilient than most economies at a
time of heightened financial stress.
"I think with all that has been happening in the U.S.
financial sector, the dollar has been getting safe-haven bids,"
said Nick Bennenbroek, head of FX strategy, at Wells Fargo in
New York. "The story on the dollar hasn't changed. It has been
on a tear for the last several weeks now."
The dollar saw its largest one month rise in more than a
decade in August.
In late trading, the dollar index on the ICE Futures
Exchange, which measures the greenback's value against a basket
of six currencies, climbed to 80.017 .DXY, the highest since
September 2007. It was last at 79.815, up half a percent.
Those gains came as the euro tumbled to a nearly 12-month
trough of $1.3995 on the view that economic growth in the euro
area could slow more sharply than previously anticipated.
The euro last traded at $1.4000 <EUR=>, down nearly 1.0
percent on the day, while U.S. crude futures were down 0.3
percent at $103.00 per barrel CLc1.
REPATRIATION FLOWS BOOST DOLLAR
U.S. investors were liquidating their positions in overseas
equity and bond markets, repatriating the money back home and
lending support to the dollar, analysts said.
U.S. mutual fund flows data has shown persistent selling of
foreign equity over the last two months, according to Goldman
Sachs. Since July, the investment bank said this data has
indicated selling of foreign equity totalling $18 billion.
While this number is not significant by itself, Goldman
said in a research note that this number is a reflection of
broader trends within the U.S. investment community.
Morgan Stanley in a note echoed Goldman's sentiment.
"The dollar has been a major beneficiary of the de-risking
process, as U.S. investors, perhaps the most active
cross-border investors, bring capital home," said Sophia
Drossos, a currency strategist at Morgan Stanley.
Further pressuring the euro was a move by the European
Commission on Wednesday to lower its 2008 euro zone growth
forecast to 1.3 percent from 1.7 percent. It reduced its growth
estimates for Britain to 1.1 percent from 1.7 percent.
Analysts though said that despite the poor growth outlook,
it was unlikely that the European Central Bank would cut
interest rates anytime soon even as the Federal Reserve's
aggressive easing put the U.S. economy on a recovery path.
The dollar also rose against the yen, ignoring the Lehman
news. Analysts cited market talk of possible downgrading of
Japan's sovereign debt. The dollar was last up 0.9 percent at
107.80 yen <JPY=>. It climbed 0.7 percent to 1.1340 Swiss
"Other that what it did to the Dow, I don't think Lehman
had that much of an impact," said CIBC World Markets' Fazio.
"The implication that it could follow through to a multiple
other financial institutions is more of a concern, but one firm
of Lehman's size does not impact on the FX market in a material
way. Lehman is not that big, it's not Citibank."
(Additional reporting by Lucia Mutikani)
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