Thursday October 23, 2008 - 09:19:58 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dlr holds gains vs euro; recession fears remain
(Changes byline, adds quotes, previous TOKYO)
* Global recession fears continue to boost dollar, yen
* Euro hits two-year low vs dollar, six-year low vs yen
* Troubles in central European markets pressure euro
* WSJ report on U.S. housing plan briefly helps sentiment
By Jessica Mortimer
LONDON, Oct 23 (Reuters) - The dollar edged up on Thursday,
staying close to two-year highs against the euro and a basket of
currencies as investors continued to cut exposure to risk on
fears of a looming global recession.
The low-yielding yen hit a six-year high against the euro
and its strongest versus the dollar in seven months as traders
rushed to unwind risky carry trades, and global stock markets
stayed weak due to the ongoing credit crisis.
Trouble in emerging markets compounded worries about the
outlook for the global economy as countries such as Hungary and
Argentina took desperate measures to shore up their ailing
economies. See [ID:nLM137440].
"We are going to see the recent pressures maintained as
emerging markets tensions continue. The dollar will remain
supported and the high-yielders will stay under pressure," BNP
Paribas senior foreign exchange strategist Ian Stannard said.
At 0834 GMT, the euro fell 0.3 percent against the dollar
<EUR=> to $1.2806, trading close to a two-year low of $1.2726
hit on electronic trading platform EBS earlier in the day.
Versus a basket of currencies, the U.S. currency .DXY was
at 85.585, near 86.070 hit earlier on Thursday for the first
time since late 2006.
Against the yen, the dollar <JPY=> fell to a seven-month low
of 96.85 yen according to EBS, before pulling back to around
98.00 yen, up 0.2 percent. The euro <EURJPY=> was little changed
at 125.60 yen, having hit a fresh six-year low of 123.43 yen.
A 0.7 percent fall in European shares kept demand
low for risky investments.
A Wall Street Journal report that the U.S. is mulling a plan
to forestall housing foreclosures [nBNG389655] briefly helped
sentiment and prompted the yen to trim some earlier gains, but
analysts said that nervousness about risk remained firmly
entrenched in the market.
"This is all still very much a risk unwinding story," BNP
Paribas' Stannard said.
CENTRAL EUROPEAN TROUBLES HIT EURO
Analysts said worsening troubles in central European markets
put further pressure on an already battered euro, given the euro
zone's close financial and trade relationships with the region.
"Serious trouble in Eastern Europe is on the horizon ...
Owing to the intensive trade integration a deep recession will
hit the euro zone much more than the US," analysts at
Commerzbank said in a note to clients.
Hungary on Wednesday hiked interest rates by 300 basis
points in a desperate bid to shore up its currency, as officials
said the country is in talks with the International Monetary
Fund to help it ride out the crisis. See [nLM390122].
Sterling was steady against the dollar <GBP=> at $1.6299,
after tumbling to a five-year low against the dollar of $1.6203
on Wednesday as concerns about the country's vulnerability to
the financial crisis remain.
Bank of England Governor Mervyn King earlier this week said
the UK is heading for recession and investors are nervously
awaiting GDP data on Friday, which are expected to show the
economy contracted in the third quarter.
(Reporting by Jessica Mortimer)
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