Thursday October 2, 2008 - 09:52:03 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr rides higher on Senate vote, ECB in spotlight
* Euro hits one-year low vs dlr ahead of ECB meeting <EUR=>
* Dlr index nears 1-yr high .DXY after Senate OKs bailout
* Outcome of second House vote on rescue plan still a worry
* ECB seen keeping rates steady, Trichet comments in focus
(Updates prices, adds comments, changes byline, previous TOKYO)
By Ian Chua
LONDON, Oct 2 (Reuters) - The dollar neared a one-year high
versus a basket of major currencies on Thursday after the U.S.
Senate passed a $700 billion bank bailout plan, while the euro
slid ahead of the European Central Bank's verdict on rates.
The rescue package, which will allow the U.S. government to
mop up toxic mortgage-related assets from ailing banks, still
faces a second vote in the House of Representatives, which had
earlier voted against it.
House Financial Services Committee Chairman Barney Frank
told CNN the bill was more likely to pass in the House, but the
outcome was still uncertain. The House will probably vote on
"Overall, there is a recognition that this is broadly dollar
positive and the momentum is in favour of the dollar," said
Daragh Maher, deputy head of global FX strategy at Calyon in
For the euro, investors are keen to see if the ECB will
shift from its hawkish stance following signs of easing
inflation and mounting risks to economic growth from the
financial market turmoil.
The ECB is widely expected to keep rates unchanged at 4.25
percent. Markets will be keen to hear the bank's take on the
financial storm and whether there might be an impending change
to its policy stance. See [ECB/INT].
"Under more normal circumstances, rates being kept unchanged
would be euro positive but in this environment it would be seen
as intransigence on the part of the ECB in the face of
deteriorating growth," Maher said.
At 0812 GMT, the dollar index, a gauge of its performance
against six major currencies, was up 0.4 percent at 80.050
.DXY -- near a one-year peak of 80.375 struck last month.
The euro fell 0.8 percent on the day to $1.3907 <EUR=>,
having hit a session low of $1.3856 -- a level last seen in
Against the yen, the single currency slid 1.3 percent to
146.41 yen <EURJPY=>, after having touched a two-year low of
Investors are now eyeing ECB President Jean-Claude Trichet's
latest take on the intensifying global financial turmoil. He
will give a news conference at 1230 GMT, following the rate
announcement at 1145 GMT.
"Several analysts expect that the ECB will hint to a rate
cut in the near future. The ECB would have to adjust its
assessment of future economic developments, though. So far, the
ECB has been rather optimistic about growth prospects," said
Commerzbank analysts in a report.
Despite being at the epicentre of the financial crisis, the
dollar has surged this week after a number of European banks had
to be bailed out -- nailing home the international nature of the
crisis. This had hit the euro and pound.
Banks scrambling to buy the greenback on the open market
because they have been shut out from borrowing funds in frozen
interbank money markets have provided further support for the
The confluence of factors has pushed the euro and sterling
both down about 4 percent against the dollar so far this week.
Sterling slipped 0.3 percent on the day to $1.7656 <GBP=>.
(Editing by Mike Peacock)
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