Tuesday September 30, 2008 - 11:44:02 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr rallies vs yen; cautious optimism creeps in
* Dollar jumps over 1 pct vs yen; U.S. stock futures rise
* Cautious optimism on US bailout plan despite rejection
* Currency markets remain highly volatile
* Euro under pressure; Dexia partially nationalised
(Adds quotes, updates prices, changes byline)
By Jessica Mortimer
LONDON, Sept 30 (Reuters) - The dollar jumped 1 percent
against the yen <JPY=> on Tuesday, as shock at the failure of
the U.S. Congress to approve a $700 billion bank bailout plan
gave way to cautious optimism that a deal may yet be reached.
Talk that U.S. lawmakers may reach some kind of agreement by
the end of the week and speculation that central banks could
slash interest rates allowed risk aversion to ease, with U.S.
stock futures rebounding after Wall Street on Monday experienced
its biggest one-day sell-off since 1997.
Trading continues to be dominated by waves of volatility,
however, making it difficult for currencies to establish firm
"We're seeing dollar/yen bounce around as optimism ebbs and
flows about the U.S. bailout package, but we're not getting a
trend," Standard Bank currency analyst Steve Barrow said.
"Markets tend to move when we're pretty certain about
something. Here everyone's flying blind," he said, describing
volatility as "astronomical".
Implied one month dollar/yen volatility jumped to its
highest since mid March at 19.1 percent <JPY1MO=>.
The dollar slumped to a four-month low against the yen at
103.50 on trading platform EBS as investors scrambled into safe
haven assets after U.S. lawmakers unexpectedly rejected the
unprecedented rescue deal, which should have injected some life
into frozen money markets.
But by 1104 GMT, the dollar was up 1.1 percent against the
yen <JPY=> to 105.19, according to Reuters data. The euro fell
0.6 percent <EUR=> to $1.4416 and by 0.1 percent against the yen
<EURJPY=> to 150.27.
EUROPE'S BANK WOES INCREASE
The euro and the pound made very little headway against the
dollar, staying not far above the 10-day lows reached on Monday
as evidence continued to highlight the international complexion
of the banking crisis.
The French government took a 25 percent stake in
Belgian-French financial services group Dexia (DEXI.PA: Quote, Profile, Research, Stock Buzz) after a
capital injection of 6.4 billion euros by France, Belgium and
Luxembourg to shore it up. See [ID:nLU129366].
Ireland's government announced a scheme to safeguard
deposits on Irish banks, which it said guarantees around 400 bln
euros of liabilities. See [ID:nWLA0491].
Banks in Britain, Belgium, Russia, Iceland and the United
States have been rescued by authorities so far this week,
prompting mammoth injections of cash into the global banking
system by central banks on Monday aimed at lubricating money
But interbank rates remained painfully high, showing the
central banks have not succeeded in easing credit tightness.
The market expects U.S. consumer confidence data and the
latest purchasing managers' index on Chicago manufacturing
activity later on Tuesday ECONUS to underline the weakness of
the U.S. economy.
(Reporting by Jessica Mortimer; Editing by Ruth Pitchford)
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